05/25/2010
All Eyes on Euro
As the money markets work through a possible near-$1 trillion bailout package, all eyes are on the status of the Euro.
Underneath that conversation, the banks and private money look at LIBOR and its relationship with domestic interest rates.
Warren Mosler defines the relationship in his post about the whole ordeal as “when the Eurobanks are faced with higher costs of borrowing dollars, those higher dollar interest rates can cause the dollar LIBOR settings to rise.”
Mosler simplifies a much longer explanation with: Eurobanks paying higher rates of interest on dollar loans causes interest rates to rise in the US.
Internally, we discuss the effects of the LIBOR change and interest change on our profits—we cannot be the only firm having this discussion amongst one another.
In general terms, what are your thoughts on where this predicament is heading and how will it affect private and hard money through an already-poor market?
05/18/2010
Grateful For the Demand, But At What Cost?
We constantly write about bank fallout and how private money should be proactive and become a solution to suffering borrowers and referral sources.
While taking a deal from lead status to closing is everyone’s own endeavor, the source of the loan demand is a provocative tale when seen from a high-level perspective.
According to Henry Blodget’s article “God It’s Great To Be A Banker,” an argument is made that banks don’t lend their money to the risky private sector and instead lend it back to the government, making a roughly 3% or more on spreads.
This practice is partly to blame for the increased demand for loans that gets pushed to mid-sized to small banks, which then turn the demand away because these banks reach their lending limits, or do not want to take on the risk either.
The last resort: private money.
“Why would I want your n%+ deal when I’ve been getting <n% from my bank?”
Like any good story, understanding the plot from beginning to end makes the drama that unfolds make a lot more sense.
What do you think?
04/06/2010
“Take My Empty Building – Please”
An April 2010 article in Oregon Business addressed the slow crawl of the commercial real estate market in Portland, OR. Highlighting the halted construction of the Park Avenue West building, the article touched on how the site will be a reminder of poor lending conditions and the slippery slope of recovery yet to come.
According to the article, there will be much less “building on spec,” tighter financing restrictions despite local ties and much more credence placed on having tenants from the get-go for a project.
The article cited experts’ opinion that we haven’t seen the bottom of the market trend yet—a bottom that won’t come until 2011.
With global and local markets suffering, what is your organization or firm doing despite the bad news?
For those of us who are still viable resources to borrowers, we must be doing something right. We’ll have to keep doing what we do in order to push through these down times.
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