Holy shnikes...check out the charts below to see it in all its glory...
Note that these problems have nothing to do with "liquidity." (Remember earlier this year, when Tim Geithner was blaming everything on a "lack of liquidity"?) These loans are going bad because the real estate companies can't make their interest payments--because the tenants can't pay their rent.
Richard summarizes the situation:
Loan Performance Deteriorating Precipitously
* Speed of deterioration in loan performance is unprecedented, even relative to the early 1990s * Total delinquency rate reached 4.1% in June, 2.2 times its March level and 3.5 times that in December * Delinquency rates are likely to soar higher over next 24+ months on billions of dollars of pro forma loans that never stabilized and resetting partial IO loans * With 2,158 delinquent fixed rate loans ($27.9 billion) special servicers may soon be under pressure * DB CMBS Research projects term losses will reach 4.3-6.3% for the outstanding CMBS universe ($31.3-$46.4 billion), and 8.4-12.1% for the 2007 vintage
It can't correct before the real economy rebounds can it? And assuming it will rebound more quickly again this time fails to acknowledge the changed paradigm. We've overbuilt for what? 30 years straight? The overcapacity in CRE is astounding and will take time. Previous corrections were accompanied by renewed growth, but this time I don't see growth potentially renewing itself like the rest of the post war recessions.
I've never met a retarded person who wasn't smiling.
