Next Round Of Foreclosures To Hit Retail

Many Malls, Other Large Commercial Properties Struggling To Make Payments

(CBS/AP)  Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.

"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

That's bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Retail stores were busy Thursday putting the finishing touches on efforts to draw customers in, despite the battered U.S. economy, reported CBS News correspondent Seth Doane.

"This is it, we're at the end," said Barbara Cook, head of stores for Gap, Inc. "What you're seeing is the finish line of the whole kind of retail chain here."

Eighty-nine percent of shoppers plan to spend the same, or less, than they did last year. Only 11 percent plan to spend more.

Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.

But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.

"It's a toxic drug and nobody knows how bad it's going to be," said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.

Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.

Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.

Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.

California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.

The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won't write mortgages as long as investors won't purchase them.

"Credit markets have seized up," corporate securities lawyer Michael Gambro said. "People are not willing to take risks. They're not buying anything."

That drives down investments already on the books. Insurance companies are seeing their stock prices fall on fears they are too invested in commercial mortgages.

"The system has never been tested for a deep recession," said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.

One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.

"He's created havoc in the marketplace by changing the rules," Rosen said. "It was the stupidest statement on Earth."

The Securities and Exchange Commission is considering another option that might ease the crisis, one that would change accounting rules so banks don't have to declare huge losses whenever the market declines.

But the only surefire remedy is for the economy to stabilize, for businesses to start expanding and for investors to trust the market again. Until then, Tross said, "There's going to be a lot of pain going forward."

[perk235]

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn''t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

[perk235]

Quote from Thomas Jefferson:

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to
it properly belongs." - Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)
Posted by WarDogLRS at 02:11 AM : Nov 29, 2008
---------------
JFK started the Treasury Department printing silver-backed dollars before he was killed. It was the last time anyone has tried to print paper money outside of the Federal Reserve.

The Federal Reserve is NEITHER FEDERAL NOR A RESERVE. It is a group of privately owned banks. The name is a slight of hand to lead the gullible.

Look at the bills you have in your wallet. They say FEDERAL RESERVE NOTE. All the other symbols and words are hogwash. It is a NOTE OF DEBT TO THE FEDERAL RESERVE.

[babooph]

Reducing taxes on the rich & losing two wars ,funded by letting China own the US assets has been a "brilliant" economic plan -the US propaganda system sold it so well 1/3 of US voters stll are deluded enough to believe in it !!!

[drdilemma]

Be nice if the Forbes 400 put back some of the money they made off of the backs of the middle class to save our economy...

http://www.forbes.com/lists/2008/54/400list08_The-400-Richest-Americans_Rank.html

[wardoglrs]

"Paper is poverty,... it is only the ghost of money, and not money itself." Thomas Jefferson to Edward Carrington, 1788


President FDR (on Fascist rule in a letter to corporate con man %u201CColonel%u201D Edward M. House, a founder of the Council on Foreign Relations and political fixer for the ruling class. House also handled President Wilson for the foisting of the privately rigged %u201CFederal Reserve%u201D Corp bank monopoly. 11/21/ 1933)

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)

[whitemale08]

The aftermath of our ''debt-based-consumer-led'' economy is beginnning to look real ugly.

Empty parking lots at shopping malls are becoming drop centers for drugs and prostitution.

and hedge-fund un-repentant Nazi sympathizer George Soros wants to make the drug trade legal so it can replace the ''consumer economy'' with ''drug-s*x-guns'' for a society emersed in fuedalism and serfdom.

A New Dark Age is what these Wall Street clowns want and those idiots in the "City of London" wants the whole world mired in a toxic wasteland that looks like a scene out of the movie "Children of Men".

[edlo3]

this is like a tsunami, we are going to be wipe out, there is no end to this, is a vicious circle and the domino theory started,,,,so lets see where is going to end...

[mikezembill]

buyGoldSilver to hell with Wall-MART they are one of the biggest importers from (COMMUNIST) CHINA IN THIS COUNTRY AND IT SHOULD BE STOPPED NOW. And when the people that buy the S-H-I-T from Wall-Mart and do not have a job they will be the first to sign up for a free check to eat.

[bjcone8559]

Alo, I am aware of the "chicken wars", they were used as a bad example when Clinton was persuing the NAFTA.

Posted by machineguy at 07:14 PM




The North American Free Trade Agreement (NAFTA) (Spanish: Tratado de Libre Comercio de Amirica del Norte [TLCAN], French: Accord de libre-ichange nord-amiricain [ALENA]) is a trilateral trade bloc in North America created by the governments of the United States, Canada, and Mexico. The agreements were signed in December 1992 by the leaders of the three countries %u2014 Brian Mulroney of Canada, Carlos Salinas de Gortari of Mexico, and George H.W. Bush of the United States but did not come into effect until January 1, 1994[1] when Jean Chritien was in office in Canada.

George H. W. Bush was Dubya''s father... before Clinton, dumbazz!!

You need to stop making shlt up!!

[whitemale08]

One of the new government sponsored jobs that Obama talks about will be demolitions of shopping centers and strip malls.

Already you can see accross North America huge empty parking lots and strip-malls in small towns and suburbia.

Since it will be such an eye-soar, America will have to go back to physical work by first tearing down these empty cathedrals of consumption.

[McHineguy]

Attempting to educate you is becoming a monumental task! The ''''simple'''' reason for the numbers you cited is the top 5% hold 90% of the wealth in this country. The idea that they only pay 70% of the taxes defeats your argument!


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Posted by nowaymcgoo at 05:43 PM : Nov 28, 2008

I resent your accusations and will not continue dialog much longer if they continue. But I will try to educate you about another view you could consider. The rich do not posess 90% of the wealth. It is difficult to find a non biased source for information about accumulated wealth but if you have a reference (not another opinion please) I will read it. Moreover, taxes in our country are levyed according to income, not accumulated wealth. In that case, those making only twice the average are paying 4 times what the average pays. Again, this comes from the IRS.

Alo, I am aware of the "chicken wars", they were used as a bad example when Clinton was persuing the NAFTA.

But I dont think any of this will convince you or even inspire you to present real facts. You are here to preach and insult. And I am tired of telling you things only to have insults returned.

So goodbye, I am seeking people with intelligence to discuss alternative ideas.

[likenoone-2009]

Most of you people will end up in soup lines

[buygoldsilv]

Good riddens to the overpriced malls! Shop Wal-Mart, Costco, BJs, Sams and save $$$ and no hassle returns.

[bjcone8559]

Thats ok just shop wall-mart as much as you can buy all you can from China and then B-I-T-C-H because you do not have a job.


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Posted by rxzyu


The funny thing is, if you talk about buying American products, the republicans start screaming ''protectionism''.

[bjcone8559]

D.AMN SOCIALIST!!


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Posted by Hackerpc


Who?

[mikezembill]

Thats ok just shop wall-mart as much as you can buy all you can from China and then B-I-T-C-H because you do not have a job.

[bjcone8559]

Well, it looks like if anyone would know, you would.


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Posted by wl7bzh


Point well taken. The publish button gave me a little problem. Sorry.

[wl7bzh]

I have suggested twice now that you should probably try reading before you make statements about a particular topic. It would appear, now, maybe you should read your own posts. You''''re sounding a little schizophrenic my friend.



Posted by nowaymcgoo at 04:41 PM : Nov 28, 2008

Well, it looks like if anyone would know, you would.

[bjcone8559]

It is time to institute public works projects to shore up our infrastructure, reduce or dependence on foreign oil, improve our education system and supply the jobs to overcome our current economic problems. We must resort to deficit spending to cure our problems and to make the necessary investment for our future. This is not being liberal or conservative; it is doing what is right.


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Posted by sbanicki


EXACTLY!!

I would add, however, deficit spending is already in full swing.

[bjcone8559]

It is time to institute public works projects to shore up our infrastructure, reduce or dependence on foreign oil, improve our education system and supply the jobs to overcome our current economic problems. We must resort to deficit spending to cure our problems and to make the necessary investment for our future. This is not being liberal or conservative; it is doing what is right.


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Posted by sbanicki


EXACTLY!!

I would add, however, deficit spending is already in full swing.