History Rhyming

Gee, we are looking at collapsing real estate, particularly in commercial real estate, mortgage backed securities beginning to look more like a millstone than an investment, and this has been compounded by negligent and corrupt ratings agencies.

This sounds very familiar about a lot of people:

Troubles in the commercial real estate (CRE) markets, which have been predicted for years, appear to be growing. Delinquency rates above 30 days on office building loans ticked up in June, representing close to $2 billion in losses, according to a report from Moody’s. Office vacancies are at a record high of slightly over 20 percent, and this has translated into loan defaults, stretching from the Illinois Center tower in Chicago to a suite of office buildings in Mountain View, California, in the heart of Silicon Valley.

A couple billion in defaults in a market valued around $20 trillion isn’t worth worrying about. But a significant chunk of CRE loans are starting to come due for the first time since the pandemic greatly increased working from home. Prices on commercial properties began dropping last spring for the first time since 2011, and regional and local banks, which are more exposed to these loans, are in a particularly precarious position. Regulators are even starting to talk about fraud and questionable valuations in these markets.

Experts have described CRE as “a train wreck waiting to happen.” But Moody’s is a company that’s supposed to have seen the train wreck coming. It is a credit rating agency, which assesses risks in bonds and securities and assigns a rating that reflects those risks. If losses in bonds backed by CRE were inevitable, the credit rating agencies should have built that into their models rather than assigning them super-safe ratings.

Yeah, this sounds a lot like 2008.

It took over 70 years to unlearn the lessons of the Great Depression, but only 16 years to unlearn the lessons of the Great Recession.

Why is that.

Well, I guess the lack of prosecutions and the massive government bailouts of the malefactors of finance led to people not taking that catastrophe seriously.

Arrest the banksters, arrest the senior management of the ratings agencies, and arrest the underwriters.

Just arrest them all, and get them fired ……… Out of a cannon ……… Into the sun.