Financial Crisis: Plenty of Would-Be Infernos Still Smoldering

One reason why the financial crisis has been so devastatingly far-reaching stems from the sheer number of eruptions that helped bring it about.

Hence, while the focus has been on putting out nearby fires, other would-be infernos continue to smolder, poised to burst into flames with little or no warning.

To give one example, while the bulk of policymakers' efforts are now centered on bringing the charred remains of the U.S. banking system back to life, other equally serious problems continue to fester, as Larry Doyle reminds us in a post for his Sense on Cents blog entitled "Uncle Sam’s Dirty Little Secret":

If a tree falls in the forest and nobody is there to hear it, does it make any noise?

If an agency is sitting on billions in losses but nobody asks about it, can we forget about it?

If an entire group of banks is sitting on hundreds of billions more in losses, and the media is not even aware of this banking system, can we pretend they don’t exist?

Oh, if only we could, perhaps our economic life would be so much simpler.

While Uncle Sam and the media can choose to overlook these institutions, the losses are real and will serve as a drag on our economy and nation for the foreseeable future. Yet, they receive very little attention. Fortunately, Bloomberg shed a hint of light on part of this problem today in writing, Fannie Mae, Freddie Mac in Limbo as Geithner Seeks More Time:

Comments

[Mad Hedge F...:]

My first pick is commercial real estate. The Dana Point, California St. Regis Monarch Beach Hotel has defaulted on a $70 million loan, while lenders have repossessed the “W” Hotel in San Diego. Thus, the spotlight is again refocused on the next phase of the financial crisis, where an army of shoes are falling. A torrent of tenant bankruptcies is creating “see through” buildings in cities throughout the country, which are becoming as abundant as Priuses at an Obama rally. Some players see a further three year bleed that could take property prices down another 40% from here. Large, publically traded REITS have used the three month stock market rally to raise $11.5 billion in new equity that will enable to reduce debt and leverage, as well as buy up of weak competitors and distressed property. Look at Simon Properties Group (SPG), up 128% from the March lows. The saving grace here is that the recent bubble was nowhere as inflated as the S&L crisis in the early nineties. But cap rates may have to climb to the double digit levels we saw then before this period of punishment ends. Cash rich hedge funds are circling.

Jun 21 09:29 AM

[nobby73:]

If a tree falls in a forest and you are stuck up it, you'll know it makes a sound....

Jun 21 10:32 AM

[Hurts:]

From my-pet-goat and Goldie-locks - Sen. Lindsey Graham, and the other repubs – wall-streeters and manidesto’s - have been reading way too many kids books as facts of life. We won’t even go into my-pet-goat – But Goldie-Locks – Perfectly fine to break-into somebody’s house – steal anything and everything – To your hearts desire – New question for repubs? What part of – It belongs to them don’t you UNDERSTAND?

Jun 21 10:59 AM

[Fitz919:]

You provided lots of inuendo and no facts to back anything up, shame on you. This article was a waste of cyberspace.

Jun 21 01:31 PM

[KIT:]

GYW.. Grave Yard Whistlers are not ignoring the facts check INSIDERS for stock sales after cashing in their stock options

moneycentral.msn.com/i...

www.marketwatch.com/in...

Jun 21 08:22 PM

[Frugal Joe:]

Brilliant article!

Thanks.

Jun 21 08:54 PM