The industry is reading off the exact same script as 2008 but with all sorts of increasingly silly financial instruments based off commercial real estate. Because of course commercial real estate is different.
This is crazy and has been going on for a while. I fear this is every bit as big as 2008. A lot of wealth is about to evaporate. A lot of it from the middle class. I notice that the market is UP and Americans are killing one another in the streets. What is this going to look like when unemployment hits 30%? Our whole economy runs on credit. At some point the banks are going to get squeezed by this. Nobody is going to sign a lease on commercial property in 2020. Businesses need to borrow money. The fed is trying to print money fast enough to shrink the problem, but I do not think there is any way for them to stay ahead.
Totally unrelated question. That guy Jared Kushner: does anyone remember what industry he's in?
I suppose the bank isn't primarily interested in the loan being paid on time, they just want it paid some time. (Not sure, a delay might even be good for their business model?)
The bank is definitely interested in problems of solvency, and the tenant is interested in minimising cost, but kicking the can down the road might be the easiest option for them. Maybe a competitive creditor could break that impasse though. Threat of insolvency certainly would.
You're asking why bond buyers keep buying bonds from banks that promise high returns, without looking at the underlying investments.
And that is what hasn't changed since 2008 (or 1929, for that matter).
> That said, Covid is changing everything. I can honestly say I’ve seen 10x more modifications in the last 3mo than I saw my entire career including the great financial crisis. There is a HUGE flurry of activity happing in the commercial finance sector that nobody outside of the industry is talking about.
Answer: because they pawn the loan off on naive investors who trust the bankers to not be scamming them. Naive investors don't care because they are money managers for a pension or something.
Also, seems as though the structural issues need to be updated on the 'owners' of said mortages.
The "pray and delay" logic also seems to reflect inverted causation fallacies where they think a lower rent business will neccessarily drive away other higher rent ones and "devalue" it instead of it being a reflection of the fact they can't sustain the higher rents required to pay for it.
So what’s economic outcome of all this? It looks like more commercial properties should get rented out and the rents should also fall?
And under debt I mean not just financial - if you look at every organisation you will see huge technical debt, which is often less observed and accounted compared to financial debt.
So going back to your question, it may or may not be suboptimal to do so, there is no way of knowing at timespan long enough to answer the question with substantial evidence.
And if we honestly ask ourselves if we want the vast crisis proliferating at every level of our society to happen during our lifespan or being delayed to some time after we die - the answer may not be the one we'd expect.
And even if you and me are ready to jump into it in order to save coming generations some normal life - most of guys behind us have different opinion on it.