Not everyone is enthusiastic about the recovery. New York Fed President Bill Dudley is concerned about several things, including commercial real estate.
Yes, financial markets are performing better, but on the negative side, unemployment is way too high.
Dudley, who spoke last night at Fordham University said that the recovery will turn out to be “moderate by historical standards,” an outcome he calls “disappointing” and which will not to bring the unemployment rate—currently 9.8% —down quickly.
He said three restraining factors are into play: The shock to household net worth seems likely to have several important implications for household behaviour; the fiscal outlook, as the stimulus is a temporary fix; and banks’ still-in-the-dumps’ balance sheets, which makes them capital constrained and hesitant to expand their lending.
While Dudley addressed the 800-pound gorilla – commercial real estate — which is “under particular pressure,” and laid out the reasons of the sector’s sorry state, he falls short from offering any solutions or saying that banks might want to start cleaning up their balance sheets. (Thanks!)