By
Bena Ilyas
March 11th, 2024
Tom Barrack, the head of Colony Capital real estate investment firm, claims that the next big crisis can be harder than the Great Depression. He suggests that the market needs an additional supply of liquid cash, as well as borrow system restructuring until 2024.
Per the U.S. based commercial mortgage market shark, Tom Barrack, the market signs are telling that the collapse is imminent. The borrowers must not fall into default, because this would mean a domino effect for the industry.
Barrack is working as the CEO of Colony Capital Inc., he wrote a long read for Medium blog recently. In it, he outlines that evictions, bank failures, a wave of margin calls and the crisis in general, all put the American economy on the rails to collapse. The U.S. economy could lay low or entirely stop, per Barrack. Per the analyst, it’s all about the loans, because the entire market is depending on them. And the loans are often the first thing that burns out in case of a crisis:
“Loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and homeowners, landlords, developers, hotel operators, and their respective tenants and employees.”
Per his most significant prediction, Tom claims that the coming crisis can even be worse than the one during the Great Depression. Not only the U.S., but a wide range of the developing countries can fall under the heavy strike by coronavirus on supply chains.
The Paper Suggests a Number of Rescue Tactics for Mortgage Market
Per Barrack, real estate investment trusts (REITs), as well as credit money from the lenders are weak instruments of stabilization. They cause even more panic, so alternative decisions must flow in. The finance mogul thinks that the government and financial people can use $500 billion of the taxpayer money to increase the liquidity on the market. That money can land in the pockets of Americans via loans or repurchase agreements.
Barrack claims that the loan rules working in the usual economy must fall under restriction during a crisis. The temporary suspension of market-to-market accounting is also good. He suggests that the accounting of those debts is better to do in 2024. After the new system of debt calculations will emerge.
He notes that this situation could turn as being pretty healthy for the banks in case they will decide to cut out some of the percentage put on loans. The crisis can serve as a pleasant cause behind the decision, as people indeed will experience a lack of available funds in the mid-term if the pandemic strengthens.
Tom Barrack has been a friend of the U.S. current President Donald Trump. The decisions that Trump will make have a direct impact on the fragile real estate market. The Colony Credit Real Estate shows a balance of $3,54 billion and a $725 million of debts.
