The Donohue Company

Commercial and multi-family real estate investors are finding it more and more difficult to obtain adequate financing at reasonable rates. As a result, a variety of data sources indicate a reduction of 65-80%  in 2008 vs. 2007 total transactions.

One of the most significant causes of the credit crunch has been  the near disappearance of new Collateralized Mortgage-Backed Securities (CMBS) securitized by commercial and multi-family mortgages. Until now CMBSs have provided a robust and much needed secondary market for loans on commercial and multi-family properties. But Read More »

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.”

— President Woodrow Wilson, in reference to the
Federal Reserve Act of 1913, which he signed into law. Read More »

Most of us have heard the story of the farmer who bought a mule from a mule dealer. When he got it back to the farm he found that the animal would not obey any command: giddyap, whoa, gee or haw.  So he took it to the mule dealer and demanded his money back. "You just don’t know how to manage him," said the dealer, who promptly picked up a two-by-four and hit the mule over the head. "The first thing you’ve got to do," explained the dealer, "is to get his attention." Read More »

It’s very reassuring to have an uncle who will back you up on all your risky investments – that is, only if you are his niece . But it must be very disconcerting to know that your uncle is gender-biased and will not back you up if you are his nephew .

But if you are his nephew and do make a risky investment and – lo and behold – your uncle comes to your rescue, then Hooray!! The problem will not be that you will dissolve into bankruptcy, but that all your uncle’s other nephews may come to expect the very same treatment. Read More »

”If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered . ”

— President Thomas Jefferson

An oft-heard aphorism is that if you find yourself in a deep hole, the first thing to do is to stop digging . Chairman Bernanke may be beginning to get the message, but we seriously doubt it .

The basic, underlying problem with the U . S . economy is not a shortage of credit but rather an overabundance of credit resulting in excessive personal debt, excessive municipal debt, excessive federal debt, excessive housing debt, excessive credit card debt etc . etc An entire generation has come to believe that almost anything can be purchased on credit and paid for sometime in the distant future . Read More »

It took only 48 hours for Citi’s new CEO, Vikram Pandit, to make his first major move since taking the helm at the bank. In one fell swoop, he transferred $49B in shaky mortgage assets held by seven SIVs controlled by Citi onto its balance sheet. (See our Oct. 22 posting for additional details.) Moody’s wasted no time in lowering Citi’s credit rating from A2 to A3 as its stock continued its 40% decline. Read More »

If you are having a bit of trouble understanding the goings-on in the financial market, it may help to remember that all the government’s plans, manipulations and machinations are directed toward one primary goal: the rescue of the money center banks from a disastrous outcome. Read More »

The subprime mortgage issue is falling on the global credit scene like a cluster of napalm bombs, exploding not just locally in the U.S. but setting financial conflagrations around the world.

It ought to come as no surprise to observers of the scene that the peak of the subprime fallout still lies ahead. The greatest number of adjustable rate mortgages were scheduled to reset a month ago, in October ’07, although the total number scheduled to reset through 1Q08 remains very high. If we assume that it takes about 90 days for a mortgage in default to enter into the foreclosure process, Read More »

Secretary Paulson has been able to cobble together three large banks (Citigroup, B of A and J.P. Morgan Chase) to fund a new special-purpose entity, the Master-Liquidity Enhancement Conduit (M-LEC). With $80B the M-LEC will buy commercial paper issued by structured investment vehicles (SIVs) which invested in various debt instruments. A great majority of the SIVs are “off balance sheet” entities created by the major banks. Citigroup, for example, created at least 7 SIVs: Beta, Centauri, Dorada, Sedna, Five Financial, Zeda and Vetra which are reported to have $400B in debt instruments. The M-LEC fund, which is not financed or guaranteed by the Treasury, is scheduled to begin operations by Jan. 2008. Read More »

The fractional banking system once limited the amount of loans which a bank could make to 90% of total deposits on hand. Once that limit was reached, the bank could extend no further credit. But since banks discovered they could sweep overnight deposits into their reserve accounts, and since they have been able to create “off balance sheet” structured investment vehicles (SIVs), the effectiveness of reserve requirements in limiting credit has all but evaporated. The governing Fed has looked the other way at SIVs.

These practices are widespread in the U.S., as well as in the U.K. The Northern Rock bank, the fifth largest mortgage lender in the U.K., recently experienced a run on the bank by depositors seeking to withdraw funds. Northern Rock, which had issued mortgages 3.1 times its deposit base, was forced to call on the Bank of England for a £4.0M ($6.0M) bailout. Read More »