Assessing Commercial Real Estate

Jeffrey DeBoer,Chairman of the Real Estate Round Table,says that the outlook is cautiously optimistic for commercial real estate.It's an uncomfortable and challenging market,but it has improved slightly the past several months.The Term Asset-backed securities Loan Facility,or TALF,is a good outline.With the TALF and the Public-Private Investment Partnership,or PPIP,we're concerned that it's taken quite some time,but if they're put in place they will provide a road out,Mr.DeBoer believes,referring to Treasury Department programs to improve credit markets and take toxic assets off balance sheets.

Fed Hard At Work

The Federal Reserve has announced a major expansion of its balance sheet in order to resolve the financial crisis.In its statement last Wednesday,the central bank's Open Market Committee said the economy has continued to contract since January.Its policy to stabilize markets and provide financial and monetary stimulus will help resume growth.Nonetheless,the Fed will carefully monitor the size and composition of its balance sheet.It is expanding the sheet in buying up to 300 billion dollars of long Treasury bonds over the next six months,plus up to 750 billion in agency-backed mortgage securities.The OMC said interest rates will stay low for an extended period.The Fed anticipates expanding the range of eligible collateral for the TALF program.It will bring its total purchase of securities up to 1.25 trillion dollars this year.The expansion of agency-related purchases is aimed at supporting mortgage lending and housing.The Fed expects inflation to remain subdued,but the risk remains for weaker growth.

Anatomy of a Crisis

Greed begets greed and the bubble grows,White House economist Larry Summers said.Then greed gives way to fear,and this fear begets fear.This is the paradox at the heart of fifnacial crises.What is the task of policy in this environment? We need a program that breaks and reverses the vicious cycles.The President's plan moves on jobs,credit and housing,attacking the vicious cycles.The Recovery and Expansion Act is the largest such plan in American history.Already its impacts are being felt,retaining teachers and cops,increasing take-home pay and extending health insurance.Contracts are underway for infrastructure projects.Consumer spending appears to have stabilized,and the financial plan addresses credit contraction.There are two pillars in the President's plan:first,one trillion or more for financing mortgages,student and small business loans through the TALF program,and a public-private partnership enabling banks to divest toxic assets;second,assuring that our banking system is well-capitalized and able to lend on a substantial scale,which starts with the stress test of major banks,Larry Summers noted.