The next bailout: Developers

The makers of the federal bailout trough appears to have taken a page from the movie Field of Dreams: “If you build it, they will come.”  The next interest group bellying up to the trough: real-estate developers.  They want subsidies to protect them from the effects of a global recession, just the same as banks, automakers, credit-card companies, and the cast of thousands (via Instapundit):

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.

Unlike home loans, which borrowers repay after a set period of time, commercial mortgages usually are underwritten for five, seven or 10 years with big payments due at the end. At that point, they typically need to be refinanced. A borrower’s inability to refinance could force it to give up the property to the lender.

A recent letter sent to Treasury Secretary Henry Paulson, and signed by a dozen real-estate trade groups, painted a bleak scenario: “Right now, we believe there is insufficient systemic capacity to refinance expiring, performing commercial real-estate loans,” said the letter. “For many borrowers, [credit] simply is not available,” the letter noted.

Had Paulson and the White House stuck with the original TARP plan — the one authorized by Congress — they would have bought back the mortgage-backed securities that the government mandated from the bad loans purchased by Fannie Mae and Freddie Mac.  The credit markets would have eventually stabilized and the credit would have been forthcoming.  Instead, Paulson and Bush decided to convert TARP into a political support system, picking winners and losers among ailing entities for no better purpose than to shore up voter support.

But hey, as long as we’re mortgaging our great-grandchildren’s future, why not add another failing industry to the list of nationalized markets?  After all, they’re Too Big To FailTM, and we keep getting assured that this isn’t real money anyway.  They’ll pay us back when they’re healthy, we keep hearing.

As long as it’s not real money, why not just bail everyone out?  Pay off all our mortgages and credit cards, and have everyone start at zero again.  Eventually, we’ll all pay it back … right?