Those of us transacting real estate in the current market sit on the fault line of the lending crisis — and a crisis it remains, though less newsworthy. The spending policies of the Obama administration and his Democrat Congress have only exacerbated the original 2008 crisis.
During a recent transaction closed last month, my company watched anxiously as interest rates spiked 1.5 percentage points in 14 days. We were fortunate. Equity requirements increased to 50 percent three days after we completed the transaction.
Lenders justifiably fear projected trillion-dollar federal deficits — starting with this year’s projected $3 trillion deficit. Lenders have no choice. There’s no backstop to Washington’s spending spree; Republicans remain leaderless. Lenders must keep rates high to protect their capital.
It seems obvious: Unattractive high interest rates and huge equity requirements do not relieve a contracting economy.
While the Obama administration and Congress may not understand this, the savvy American people do.
A new Wall Street Journal/NBC News poll finds growing concerns about government spending. Nearly 60 percent said that the president and Congress should focus on keeping the budget deficit down, even if takes longer for the economy to recover.
And the latest New York Times/CBS News poll showed a substantial majority — six in 10 people — surveyed said the administration has yet to develop a clear plan for dealing with the deficit, including 65 percent of independents.
Whether it’s tackling a 5.5 percent annual contraction of the economy, or reversing home foreclosures, credit remains critical. The two polls show that Americans understand this. Unfortunately, the Democrat-dominated Congress and the president do not. The New York Times/CBS News poll revealed that majority of people believe their policies have had either no effect yet on improving the economy or had made it worse.
The last Republican administration also fares poorly in the latest polls.
Nearly three in four respondents said that the president inherited the current economic conditions, versus just 14 percent who said he is responsible for them. Only 6 percent said the Obama administration is most responsible for the budget deficit. Nearly half blame the Bush administration.
We’ll never know what triggered the credit crisis of the last 24 months.
Nor will we know which administration is most responsible. We do know that without much media attention, it remains a crisis, and the American public knows it. With their appetite for “change,” American voters are going to demand change, if fiscal discipline is not enacted soon.
Arthur Bruzzone is a regular contributor and president of Bruzzone Strategic Investments (BSI).
