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How Bad Can It Get?
If you’re anywhere near my age, your grandfather spent countless hours
talking about how difficult it was growing up during the Great Depression. I
remember him telling me he might not have gotten a job himself had it not
been for the New Deal, this country’s original bailout plan.
Wonder what he’d say if he was here now? The Bush Administration’s
attempts this fall at restarting our fiscal engine have yet to put the US
economy back on solid footing. The Emergency Economic Stabilization
Act of 2008 was supposed to bring calm back to roiling financial markets,
yet they looked to be in as bad of shape at the end of October as the
start of the month.
That so-called “Wall Street bailout” was followed by another federal move
putting billions into banks as a means of stimulating credit. The plan is simi-
lar to a previous bank bailout in Europe, and it proves a point that econo-
mists have been telling us for years: We are in a global economy.
Some say the attempted solutions border on socialism. Regardless of
what it’s called, it is clear that there are no quick and easy fixes this time
around. The International Monetary Fund has said that the world’s major
banks need a cash infusion of $675 billion over the next several years to re-
cover from the credit crisis.
It’s difficult to say yet what the bailout means for commercial real es-
tate—especially in Florida, where we have a strong track record of re-
bounding from downturns and have somehow been insulated from
national turmoil to this point. As you will read in our cover story on page
24, credit remains available for commercial deals with sound fundamen-
tals, but at more stringent terms, while many investors are waiting on the
sidelines for prices to reach their lowest point. One expert thinks another
bailout will be needed in 2009.
Any move to get money flowing into properties again is a good thing.
But the market will be very different moving forward, now that the finan-
cial nerve center for our industry has in effect shifted from Lower Man-
hattan to Capitol Hill.
A general consensus of panelists and attendees at our RealShare Con-
ferences in South and Central Florida over the past two months is that they
don’t expect the economy to rebound until sometime in 2010. That’s at
least five quarters away, and you don’t need an economist to know that
things will get worse before they get better. Here’s hoping we don’t have to
compare too much with what our elders lived through.
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