Federal Reserve Chairman Ben Bernanke said a potential wave of defaults in commercial real estate may present a “difficult” challenge for the economy, without committing to additional steps to aid the market.
Bernanke, testifying before the Senate Banking Committee urged lenders to modify “problem” mortgages to avert defaults. Christopher Dodd, the Connecticut Democrat who chairs the panel, told Bernanke that “some have suggested” the commercial market “may even dwarf the residential mortgage problems” in the U.S.
It “may be appropriate” for the government and Congress to consider “fiscal” steps to support the industry, Bernanke said today. Ideas for fresh support for the market could include government guarantees for commercial mortgages, Bernanke also said while noting no proposal on the subject has emerged.
U.S. commercial property prices fell 7.6 percent in May from a month earlier, bringing the total decline to 35 percent since the market’s peak, Moody’s Investors Service said in a report this week. Commercial properties in the U.S. valued at more than $108 billion are now in default, foreclosure or bankruptcy, almost double than at the start of the year, Real Capital Analytics Inc. said earlier this month.
Bernanke went on to say, “As the recession has gotten worse in the last six months or so, we’re seeing increased vacancy, declining rents, falling prices and so, more pressure on commercial real estate. We are somewhat concerned about that sector and are paying very close attention to it. We’re taking the steps that we can through the banking system and through the securitization markets to try to address it.”
The Fed chief said, “One of the main issues for the industry is that the market for debt backed by commercial mortgages “has completely shut down.”
Now everyone in unison…”Thank you George Bush and Dick Cheney for pushing through all of your Republican deregulations during your eight years. We did not need that budget surplus that was handed to you by President Clinton as we are all so please you pissed it away. You have served us all so well. We are all enjoying the DEPRESSION you lead us into VERY MUCH.”
