By Sen. Marco Rubio of RealClearPolitics
In the mid-2000s, Minnesota resident Charles Marohn he saw A luxury shopping mall is being built in the neighboring city. By 2020, the mall was empty. It was a clear sign that supply was exceeding demand. However, as the outbreak began to subside, Marohn noticed another large area rising in a nearby area.
It violates all common sense laws, but it is common in many parts of the United States. Most of us have seen evidence of the real estate industry’s “if you build it, they will come” mentality – large buildings with no offices, unused commercial warehouses, and empty retail spaces. Now, Wall Street is confused.
Related: Regulators Know Silicon Valley Bank Is In Trouble From 2021, They Haven’t Got In.
“I see a tsunami of debt coming,” one CEO said recently he said CBS. “It’s a perfect storm,” he said someone. “You could see a run on the smaller regional banks. … And that could put us back where we were in the ’08 financial crisis.” Some real estate agents already are calling because of “interference or assistance from public officials or the payment of debts to elected officials.”
On the one hand, the fact that our financial community is willing to admit the error of its ways is a reversal of the days leading up to the Great Recession, when real estate investors held the illusion of perpetual profits until the bill came. because, and responsible landlords were left to pick up the tab.
On the other hand, the “experts” must have seen this coming years ago. Some people said that. For example, local people he blew alarm on the real estate glut in Washington, DC, since 2017. Of course, this did not stop the builders from building new houses in the capital of the country, which is still living with the wages of work. top 20%.
Vacant properties, changing household jobs, high crime rates in urban areas, the lack of affordable housing in the city – all of these and more should have ensured that the real estate market is approaching the precipice. Instead, there was an unfounded hope that things would return to “normal.” Owners used the “expand and pretend” strategy to get to the next monthly or quarterly earnings report. The facade only came down with the failure of Silicon Valley Bank.
Related: Is JP Morgan’s Purchase of Failed First Republic Bank from the FDIC a Government Bailout?
That failure was a stark reminder that things can fail, and that investors in failing businesses can be liquidated. That’s how the real world works. Unfortunately, the centralization and consolidation of our economy has distorted our markets from reality. We work and private real estate investment trusts – some who are now banning withdrawals – are some of the clearest examples of this, but they are far from the only examples.
Take the case of a Minnesota strip mall. If the developer had sought financing for the project from the local bank, it probably wouldn’t have been possible. But like Marohn they write,”[i]If the local bank has any share today, it will [typically] as a broker – getting paid to do the work and sell the loan on the secondary market. “In other words, making money is distorting the market’s logic.
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We’ve created an economy that many investors only realize they’ve lost before it’s too late to recover. That hit middle-income, working-class and low-income Americans in 2008, who faced a financial crisis as those “too big to fail” were bailed out by Washington. Unfortunately, history can repeat itself.
Related: America’s Biggest Banking Fear Since 2008 Financial Crisis
If the Biden administration protects investors from the consequences of their actions, like the Federal Reserve let’s sneak away If that happens in March, it will be transferring wealth – on a large scale – from American workers to the investors and digital liberals who created the crisis. This can destroy our culture and increase the division of our society.
As lawmakers, our job is to serve the public, not the stock market. Whether we like it or not, our economy is in the midst of a major transformation. There will be winners and losers, but bailing out real estate is not in our country’s best interests. In fact, it would be the definition of injustice.
Republican Marco Rubio represents Florida in the United States Senate.
Included is permission from RealClearWire.
The views expressed by the contributors and/or partners are their own and do not necessarily reflect the views of The Political Insider.