Finance Mortgage Banking
Oct 3, 2008
By: Scott Baltic, Contributing Editor
President Bush wasted no time whatsoever in signing the Emergency Economic Stabilization Act of 2008, inking it into law swiftly after its passage by the U.S. House of Representatives this afternoon.
The bill passed the House by a surprising margin, especially given its unexpected defeat on Monday.
The $700 billion financial industry bailout passed the House by a final vote of 263-171, a crushing victory compared to the 228-205 defeat an earlier version suffered on Monday. The 91 Republicans who voted for the bill were still outnumbered by their GOP colleagues who opposed it, but they, along with 172 Democrats, were enough to ensure the bill’s passage.
The final version contained numerous additional features aimed at enticing its opponents, primarily but not exclusively House Republicans, into supporting it. The changes included an increase to $250,000 in the cap on federal deposit insurance, $100 billion in tax cuts for businesses and the middle class, provisions to help 20 million middle-income taxpayers avoid the alternative minimum tax, and $8 billion in tax relief for people hit by natural disasters in Texas, Louisiana and the Midwest.
Although the stock markets obviously welcomed the news, a Labor Department report that in September employers cut 159,000 jobs was apparently among the factors that kept the Dow volatile in the immediate aftermath of the bill’s signing.
Treasury Secretary Henry Paulson reportedly announced his intent to begin using his new authority quickly, with Federal Reserve chairman Ben Bernanke saying that the Fed will work closely with the administration. So it appears that commercial real estate folks might actually be able to relax more this weekend than they usually have lately.
National Association of Realtors chief economist Lawrence Yun told CPN that the bill’s enactment will boost commercial real estate even more than it will help the single-family residential side. He sees the commercial sector as having been disrupted “far more” than the residential end recently, as “even worthwhile loans were not being made.”
Yun told CPN that he expects to see clear signs of recovery in the commercial real estate market as soon as a month from now, with things essentially back to normal in perhaps three months. What’s “back to normal”? According to Yun, that’s when decisions are based on the fundamentals of the real estate, not on the availability of financing.
There was, and still is, a lot at stake. Last night, when the outcome of this afternoon’s vote was still in doubt, billionaire investor Warren Buffett told TV host Charlie Rose that the current situation “really is an economic Pearl Harbor.” Buffett noted that in the previous seven days, the U.S. Treasury sold $40 billion worth of T-bills at a yield of one-twentieth of one percent. That’s the equivalent, Buffett said, of “putting money under the mattress…. You don’t want 300 million Americans putting their money under the mattress.”
The market is just vastly overleveraged now, Buffett said. “What looked so easy to borrow against a year ago now looks like rat poison."
“There is only one countervailing force” that has the power to deleverage that much debt, he said, “and that is the U.S. Treasury.”
By: Scott Baltic, Contributing Editor
President Bush wasted no time whatsoever in signing the Emergency Economic Stabilization Act of 2008, inking it into law swiftly after its passage by the U.S. House of Representatives this afternoon. The bill passed the House by a surprising margin, especially given its unexpected defeat on Monday.
The $700 billion financial industry bailout passed the House by a final vote of 263-171, a crushing victory compared to the 228-205 defeat an earlier version suffered on Monday. The 91 Republicans who voted for the bill were still outnumbered by their GOP colleagues who opposed it, but they, along with 172 Democrats, were enough to ensure the bill’s passage.
The final version contained numerous additional features aimed at enticing its opponents, primarily but not exclusively House Republicans, into supporting it. The changes included an increase to $250,000 in the cap on federal deposit insurance, $100 billion in tax cuts for businesses and the middle class, provisions to help 20 million middle-income taxpayers avoid the alternative minimum tax, and $8 billion in tax relief for people hit by natural disasters in Texas, Louisiana and the Midwest.
Although the stock markets obviously welcomed the news, a Labor Department report that in September employers cut 159,000 jobs was apparently among the factors that kept the Dow volatile in the immediate aftermath of the bill’s signing.
Treasury Secretary Henry Paulson reportedly announced his intent to begin using his new authority quickly, with Federal Reserve chairman Ben Bernanke saying that the Fed will work closely with the administration. So it appears that commercial real estate folks might actually be able to relax more this weekend than they usually have lately.
National Association of Realtors chief economist Lawrence Yun told CPN that the bill’s enactment will boost commercial real estate even more than it will help the single-family residential side. He sees the commercial sector as having been disrupted “far more” than the residential end recently, as “even worthwhile loans were not being made.”
Yun told CPN that he expects to see clear signs of recovery in the commercial real estate market as soon as a month from now, with things essentially back to normal in perhaps three months. What’s “back to normal”? According to Yun, that’s when decisions are based on the fundamentals of the real estate, not on the availability of financing.
There was, and still is, a lot at stake. Last night, when the outcome of this afternoon’s vote was still in doubt, billionaire investor Warren Buffett told TV host Charlie Rose that the current situation “really is an economic Pearl Harbor.” Buffett noted that in the previous seven days, the U.S. Treasury sold $40 billion worth of T-bills at a yield of one-twentieth of one percent. That’s the equivalent, Buffett said, of “putting money under the mattress…. You don’t want 300 million Americans putting their money under the mattress.”
The market is just vastly overleveraged now, Buffett said. “What looked so easy to borrow against a year ago now looks like rat poison."
“There is only one countervailing force” that has the power to deleverage that much debt, he said, “and that is the U.S. Treasury.”
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