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Catfish Industry, Commercial Real Estate Developers Asking for Bailouts

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It seams consumer mortgage was just one piece of the cycle, and the news is getting worse every day. And the approach to fixing it (leaving consumers up to their eyes in debt while bailing out the banks) fails to account for the positive feedback loop from falling consumer demand.

We are already bailing out mortgage (Fannie Mae & Freddie Mac), insurance (AIG), the banks, autos, and now the cancer is spreading…where government funds are being asked for by hedge funds and commercial real estate developers.

From the Financial Times:

Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200bn programme intended to support consumer credit.

The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before, although the Fed may not permit hedge funds to use offshore vehicles to conduct the transactions.

From the WSJ

With a record amount of commercial real-estate debt coming due, some of the country’s biggest property developers have become the latest to go hat-in-hand to the government for assistance.

They’re warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years — with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off.

Look for more violent swings in SRS. I wonder how far along talks are, and how this news will influence the market.

Nassim Taleb, author of The Black Swan, remains uncertain and hopes the situation is not getting worse:

But the extent of the bailout requests is absurd. Even the catfish industry is asking for $50 million, as reported by the (now bankrupt) LA Times:

“The catfish industry is on the verge of collapse,” said Marty Fuller of the Catfish Farmers of America, citing high feed prices and an increase of imports. About 6,000 jobs are at stake, mostly in economically depressed areas in states such as Arkansas, Mississippi, Alabama and Louisiana. Officials are talking about seeking $50 million in aid as a stimulus.

As Barry Ritholtz said, “Capitalism without failure is like religion without sin.” How many industries can the US government bailout before the dollar collapses? Looking at all the bailouts makes me want to go on vacation, rather than earning a lot of money so it can be confiscated by taxes and handed to crooks.

I can’t wait to read Bailout Nation! Great timing on the book, though I imagine there will be a need for an update in another year or two.

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December 21st, 2008 at 11:58 pm

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