Ex-commercial banker: Don't bail out America's "credit-drunk" commercial landlords and real-estate bankers
Unlike residential borrowers, most commercial landlords don't live in their buildings, and unless they are pleading stupidity, they understood perfectly, as did the lenders themselves, that the loans they were seeking from overeager conduit and securitization lenders were too generous. They decided to roll the dice and got rich with these cheap and easy funds. Now they are asking their formerly rich Uncle Sam to bail them out as their loans come due.
As the founder and former head of Deutsche Bank's commercial lending unit, and former senior trader of CMBS and commercial loans for Goldman, I am well aware of the perils of letting commercial-property borrowers fail: Either their lenders will have to extend them new terms, or they will face bankruptcies and tax recapture issues. Their bankers or securities holders will have to take losses and new investors will get to buy their holdings at deep discounts. Any other solution would be a travesty. The only thing more startling about the suggestion that the Treasury bail out the likes of William Rudin, Stephen Ross and Steven Roth is that they had the nerve to raise it. Washington should focus on making REMIC and securitization laws more flexible to allow extensions of loans or collateral substitution, not giving America's credit-drunk landlords and real-estate bankers a mulligan on the taxpayer dime.
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