March 11, 2008 - Roundtable Commends FED Action; Says Additional Measures Necessary

The Real Estate Roundtable Commends FED Action;

Says Additional Measures Necessary

Today, Real Estate Roundtable President and CEO, Jeffrey D. DeBoer issued the following statement regarding the today's FED announcment

(WASHINGTON, D.C.) — “We are encouraged by today’s decision by the Federal Reserve to expand its securities lending program.  The new Term Securities Lending Facility (TSLF) is a positive step that will help bring liquidity directly to where it is needed most – to home mortgage markets – and will help make financial institutions more comfortable buying and holding such securities.  However, the situation requires further action.  The Fed should expand the qualifying securities to include CMBS – mortgage securities backed by commercial assets.”

“The TSLF will supplement the Fed’s securities lending program by enabling primary bond dealers to borrow up to $200 billion of Treasury securities by pledging a range of high-quality mortgage backed securities (MBS) as collateral.  The MBS markets have been a key driver to liquidity by serving as an effective secondary market for mortgages.  With this market stalled, financial institutions have been forced to write down the value of MBS, despite their intrinsic value.  The fresh liquidity likely will help a broad range of mortgage market participants, but more needs to be done to improve the functioning of credit markets overall.”

“Despite underlying value and viable cash flow, an illiquid, no-bid market artificially depresses values.  This is clearly the case with the CMBS market whose record data to date still indicates solid performance.  According to Moody's, some $44 billion in commercial mortgage-backed securities (CMBS) need to be refinanced this year, and $24 billion is in short-term debt securities issued between 2005 and 2007.  Yet, new loan origination for CMBS securitization has ground to a halt, and securitization volume has dropped from an average of $20 billion per month in 2007 to just $2 billion thus far in 2008.  As loans mature, there is growing concern about what options will be left for borrowers.”

“While today’s measure is an excellent step in the right direction, we hope that policymakers willl explore additional measures to help the Fed better fulfill its central bank function of providing the necessary liquidity to the credit markets.”

The Real Estate Roundtable's 2008 National Policy Agenda can be downloaded here or by clicking on its cover to the right.

The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately- owned real estate ownership, development, lending and management firms with the leaders of 16 national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. Collectively, Roundtable members’ portfolios contain over 5 billion square feet of office, retail and industrial properties valued at more than $700 billion; over 1.5 million apartment units; and in excess of 300,000 hotel rooms. Participating trade associations represent more than 1 million people involved in virtually every aspect of the real estate business.    

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