Where are the Populists?

Michael Collins

"There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it."  William Jennings Bryan, 1896

The latest report from the Congressional Oversight Panel is out and they are making no bones about another shoe to drop, Commercial Real Estate (the link goes to a post warning on CRE from last July). On their main page is this:

Nearly $1.4 trillion in commercial real estate loan debt will come due for refinancing in the next several years. The Panel's February report expresses concern that a wave of defaults and losses could jeopardize the stability of many banks and prolong an already painful recession.

Let's cut to the chase and say Congress and the Obama administration have blown off Commercial Real Estate generally. Here is COP's conclusion:

The Panel is concerned that until Treasury and bank supervisors take coordinated action to address forthrightly and transparently the state of the commercial real estate markets – and the potential impact that a breakdown in those markets could have on local communities, small businesses, and individuals – the financial crisis will not end.

Or....

Shadow Bankers Gone Wild

Preamble

Recently the New York Times published yet another article expressing surprise at the previous existence of securitized financial instruments prior to the last several decades. Securitized financial instruments, or actually securitization, has been around for at least several centuries, and whenever it becomes widely used a Great Depression, or economic meltdown, ensues.

This is the foundation for that bandied about term, “shadow banking.” Without securitization, there would be no such capability. With securitization, the process for creating debt-financed billionaires and multi-millionaires reaches critical mass.

Unfortunately, so to does the dramatic increase in unemployment and poverty.

Those so-called “experts” or “pundits” who continue misleading the populace with extravagant claims as to the recent origins of the securitization process have done a major disservice to society. This brief blog will attempt to rectify this situation.

A strategist at the Deutsche Bank had something interesting to say last week regarding the economic crisis in southern Europe.

“The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.

It seems impossible that what is going on in Greece has anything to do with America. After all, Greece has defaulted on its debts so often over the last two centuries that you could almost set your watch to it. It was always contained in the past because Greece's economy is so small, so why would this time be different this time?

And yet, it isn't contained this time. It is spreading and no one knows how far it might go.