Don Tishman's Real Estate Development and Investing Solutions

I have been  been researching what happens after extended periods of lenders shutting off funds for real estate. In the 1990′s after the savings and loans committed suicide by trying to make loans they were completely ignorant of- commercial real estate. no loans until early 200′s- except for those cushy RTC deals. then the  unmet demands of many years blossomed into great amounts of inflation.  because of the very low interest rates that banks pay, these banks can arbitrage their funds with treasuries – and make money without helping any business other than their own. During the present, all businesses are screaming for loans, very few are loans are made. Yet these banks are paying off the huge subsidies they received from the Bush Administrations. Since the banks are not doing business with their customers, where do these huge profits come from? Arbitraging the low cost loans from us taxpayers. no risk, no new employees. The goal of the Federal Reserve System is to protect their customers- the banks. When rates for banks rise, the banks will have to have DO legitimate business to survive- by that time- the demand for goods will be much stronger than the supply- prices then will jump!!!

That is a direct result of the Federal Reserve giving interest free funds to banks- especially large financial institutions. When this happened the big Wall Street investment companies wanted free money- they became banks- them Goldman Sachs and Morgan booked record profits while this country almost went under.

We need an organization they protects Main Street.

In the 1930′s Franklin Roosevelt gave savings and loan companies the task of increasing home ownership in America. It was pretty simple business- the buyer of a new home went into a local savings and loan company to finance the new home.  These folks either knew each other or had common friends. Banks thought that the longest term of a home loan should be ten years. Why? The Bankers said the houses would only last about that long. Then President ROOSEVELT brought together many lenders to help design a set of specifications for a house that they would feel safe would last at least forty years. After these specifications were finally agreed on, the Federal Housing Administration(FHA) was created. If houses were constructed to these minimum property standards, and the construction was inspected by the FHA, the FHA would guaranty a portion of the home loan.

july, 2010 was the worst residential sales month in 15 years or since these sale figures were kept. New house sales are one of the  principal drivers of this economy, Why? Buying a house involves more than buying land.   Construction materials and labor, floor coverings, appliances, window coverings, tableware, landscaping, bedroom furniture, living and dining room furniture, books, lighting, and  outside yard furnishing. – to name but a few industries that depend on new home sales. Just remember the prosperity created by home sales – developing home ownership was a principal factor in the post WWII boom. In the wonderful years in the beginning of the 21st Century, home sales lead the way.

Most Americans principal asset is their home. This disaster in home prices has devastated the retirement plans of over 100,000,000 Americans and other home owners throughout the world. Why did this happen? one word says it all- GREED.

Home building companies became public companies. The investors  in stock markets demanded ever increasing quarterly earnings as a result these home building planned more  subdivisions.

In order to keep their stock price escalating, their sales must keep pace. How to do this? Increasing the size of the potential market. By reducing the financial requirements of the buyer, the homebuilders market was vastly increased. As profit increased, their stock prices jumped.

Then Wall Street whiz kids figured out  how  they could make money on the housing boom. Wall Street giants purchased these loans, and packaged thousands of these loans in bundles for investors to purchase an interest in these total loan packages. Despite the lenders reducing the financial requirements of the home buyers, the credit rating agencies gave these loans the highest credit rating. Based on the highest credit ratings, insurers guaranteed these package of loans. Then  many of these loans were in default.  Nevertheless, theWall Street sharks keep selling these loan packages to investors, while the Wall Street sharks invested their funds that these loan packages would fail.  When these loan packages failed the sharks demanded that the insurance companies bail them out. AIG was near failing. The government bailed out AIG and the Wall Street sharks. Thousands and thousands of  homeowners were kicked out of their houses, but the government aid did not apply to these homeless families.

The sharks made record profits. Main Street was howling over these injustices. Wall Street, the largest contributors to Federal elections, screamed any regulation of the sharks would hurt the economy. Tell that to the thousands of foreclosed families.

Economic giants have huge hoards of cash. What are they doing with it? Buying other companies and firing employees to consolidate the administrative costs.  The federal tax policy can provide incentives for investment- we need huge incentives for investing in jobs- make this incentive with no strings attached- Except new jobs.