U.S. Sen. Robert Menendez (D-NJ) is urging Treasury Secretary Geithner and Federal Reserve Board Chairman Bernanke to take early and forceful measures to address the rapid decline of the commercial real estate market and its potentially devastating effects on the broader economy. This sector is currently facing primarily two significant hurdles that could pose risk to the economy:
1. Increase in commercial vacancy rates, mortgage defaults, and foreclosure rates.
2. Inability to finance or refinance commercial mortgages because of insufficient lending and the break-down in the secondary market for commercial mortgage-backed securities.
“We have already seen the terrible consequences of increasing residential real estate foreclosures, and increasing commercial real estate foreclosures could very soon pose an even bigger problem for the stability of the overall economy.’ said Senator Menendez in his letter.
“The federal government can, and must, craft solutions that help kick-start commercial lending and the market for commercial mortgage-backed securities. The U.S. Congress Joint Economic Committee held a hearing on July 9th on commercial real estate and witnesses suggested a range of possible solutions. I look forward to hearing what the Treasury Department’s and Federal Reserve’s positions are on these proposals and what other efforts are underway at your respective agencies to deal with this potential crisis.”
Click here to read the letter.