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Will the beggars please form a line…

Today's Financial News - Posted December 22, 2008

I cannot believe the audacity of this country’s beggars. Greedy businessman after greedy businessman is lining up in Washington for a bailout package of their own. The free market will not help them, so now they want assistance in the world of blind politics.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore—(TFN): After the banks got their rescue, the vultures from Detroit circled Washington. Now that the automakers have gone home with stuffed wallets, the wolves that call themselves the nation’s property developers have moved in to steal whatever scraps are left. This has got to be some sort of ridiculous joke.

Whatever happened to the laws of economics? Risk versus reward? Free markets? Supply and demand?

Apparently, American businessmen feel they can do whatever they want, run their businesses however they please, and fleece as many consumers as they can along the way and Uncle Sam will bail them out if they ever run into any trouble.

It is the largest insult I can imagine for the nation’s developers to have the audacity to ask for taxpayer money to help eliminate their financial crisis. After a seemingly drunken period of incredible growth and profits for property developers, revenues have plummeted and the profits have vanished. Now the group is facing a nasty hangover.

Debt + debt = idiots

The debt the developers used to help them build McMansions in every possible nook and cranny of suburban America is coming due. Apparently, the group never thought the day would come. They are not prepared for the massive payments.

Just like every other industry that was greedily mismanaged, the nation’s property developers are looking to stick their hand in your wallet. You did not get them into this situation, but your tax dollars are going to help them out of it.

It is no joke.

Over the next three years, over $500 billion in commercial mortgages will come due. Over $160 billion must be refinanced over the next twelve months. Unfortunately, thanks to a seemingly non-existent credit market, few creditors are likely to hand out any of their precious cash.

That means it is up to the lender of last resort, you and me. The property development industry is asking for inclusion in the Treasury’s latest bailout, a $200 billion package designed to stimulate the loan industry. They want their debt to be in the same category as student loans, credit card debt and car loans.

Frankly, there is a reason creditors are not willing to enter into new loan agreements. They believe there are unusually high levels of risk and many of the assets used for collateral are not worth what the debtors say they are.

If, after hundreds of dollars of stimulus, creditors are still unwilling to lend their funds, there must be something inherently out of balance in the market – like the realization that debt cannot pay off debt.

Until the economy corrects itself and flushes huge amounts of debt out of the market (a hugely painful process), equilibrium will not be met, no matter how hard Washington tries.

If we keep lending more and more money in the name of eliminating short-term pain, the long-term ramifications are only going to get worse.

If the Treasury will not bail you out for your bad financial decisions there is no way it should write any checks to corporate Americans.

This mess has turned into one big mess that will haunt future generations. What a joke.


Next Article: For General Motors, the news keeps getting worse

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Posted by Andrew Snyder · Filed Under Politics 

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