Tuesday, November 17, 2009

Chicken and Egg - Bailout and Crisis?

A friend of mine has been sending me depressing stories all morning from the Huffington Post. I don't know if he needs a hug and is reaching out for attention, or if things are just this bad - there's an article about a kid in Michigan who is being denied a prosthetic arm by his insurance company, another about no more raw oysters, another about Al de Molina stepping down (oh wait, this could be GREAT news for BOA in Charlotte). Anyways, they linked to a, mostly factual, slide show from business insider that blames the regulators for the crisis....

UPDATE: I finished the article and decided its stupid and you shouldn't read it.

How A Government Bailout Created Today's Commercial Real Estate Catastrophe

Wait, only the first 1 or 2 slides are mostly factual, then John Carney just starts making things up. The size of the market is wrong, RTC did not "Create" the CMBS market, then he blames Basel I risk-based capital reserves, 60% of CRE mortgages were securitized (try 28%, at the height of the market!), that because of the CMBS market the remaining bank mortgages were the riskiest loans (instead of pointing out that C&D loans were always the riskiest, and he pointed out earlier that these were the primary loans that banks made before CMBS), next he blames REITs, dot com bubbles, and it goes on. I clicked through a few more slides, and its all just misguided garbage. He continues down this path that small banks have risky loans on their balance sheets because they securitized their good loans - small banks didn't securitize any CRE loans, they just originated 100% of the C&D and land loans.

You know what, don't read it. It's so misguided.

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