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Simon Johnson
The Joint Economic Committee holds a hearing this morning on worsening conditions in commercial real estate – falling rents, fewer tenants, and defaults on debt down the road. This seems to be the first hearing on Capitol Hill to focus on these issues and what can be done. “Not much” seems to be the reasonable answer.
The written testimony from Jon Greenlee, of the Federal Reserve, is particularly disheartening. There is currently about $3.5 trillion of debt associated with commercial real estate, about half of which is on the books of banks. He suggests that the Fed has been following this situation closely and has stayed on top of banks’ exposures to the sector. He also has some rhetoric about the recent stress tests. Why do I not find this reassuring?
The Hearing - Next Shock Coming: Commercial Real Estate
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