Today, I moderated a lively panel discussion on the financial crisis at the Los Angeles
Chamber of Commerce. It was called “The Urgent Economic Briefing.” The panel included: a representative from Bank of America, a bankruptcy attorney, an economist, a capital expert and someone in commercial real estate. I’ll give you a couple of highlights….
The economist, Chris Thornberg, gave a relatively optimistic assessment of where the economy is headed – I mean, relative to the depression scenarios some people are offering. Thornberg expects unemployment to rise to about 10 percent, and in California at least, for home prices to drop another 40 percent or so before things bottom out. His advice for most buyers: wait. On the credit markets, he said if things are really so horrible, why haven’t interest rates skyrocketed? Why aren’t they 30, 40, 50 percent? He said the Fed’s continual injection of cash is keeping things stable.
My question for the guy from Bank of America: “Taxpayers took a huge leap of faith
with a 700 billion dollar bailout. Where is the banks’ leap of faith? Why won’t they take
a chance and start lending again?” His answer: “Bank of America is still lending.” I
can’t say that was incredibly helpful, but he did say it’ll take about five weeks for things
to start loosening up as the Treasury buys the bad paper corrupting banks’ balance sheets.
An interesting comment from the commercial real estate guy. He said people keep
saying: “Oh, commercial real estate…. You must be doing okay.” Wrong. He said
commercial real estate is tanking badly, and the only reason you aren’t hearing about it
is because there’s no room on the front page of the Wall Street Journal. He said it will
be the story of 2009. He also suggested there are plenty of opportunities. Empty
former bank branches, for example…
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