So How’s the Economy Doing?

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Email from a friend involved in the legal end of the commercial real estate market:

We just had yet another lender pull the plug on a commercial real estate deal that was set to go.  The stated reason was minor and technical.  The real reason we’re guessing is that it has too many underwater loans on its books and simply doesn’t have the resources.

So what is happening now?  Remember the doom and gloom scenario of mass foreclosures by banks to get the bad commercial real estate loans off their books?  Well, if my purely anecdotal experience with the first few months of 2010 are any indication, that scenario will not be happening any time soon — which is a bad thing.  It will not be a dramatic cascade but a slow tentative process with limited positive impact on the economy.

Instead, it appears that banks are continuing to grant very long deferments rather than take the loans down.  The logic here is bizarre, but understandable I guess.  They are punting on the issue until the economy improves, which they are betting is next year or so.  But if they don’t get the bad loans off their books, they can’t free up their resources to provide the necessary new financing to recharge the economy.  Then next year they’ll punt again.  And the vicious circle continues. I’m not sure what the government can do here, but I sure hope there is some creative thinking going on in D.C.

It’s just a single data point, but I’ll bet there’s a lot of similar stories out there. We may have saved the banking system last year, but it’s still in pretty fragile shape.

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We didn't know what to expect when we told you we needed to raise $400,000 before our fiscal year closed on June 30, and we're thrilled to report that our incredible community of readers contributed some $415,000 to help us keep charging as hard as we can during this crazy year.

You just sent an incredible message: that quality journalism doesn't have to answer to advertisers, billionaires, or hedge funds; that newsrooms can eke out an existence thanks primarily to the generosity of its readers. That's so powerful. Especially during what's been called a "media extinction event" when those looking to make a profit from the news pull back, the Mother Jones community steps in.

The months and years ahead won't be easy. Far from it. But there's no one we'd rather face the big challenges with than you, our committed and passionate readers, and our team of fearless reporters who show up every day.

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