How will this affect the American people and the economic recovery:
This is not going to be hard to explain. If an office closes down and the office manager is on unemployment, what will happen? He, or she, will not go out to eat as much or order new carpet or stop dry-cleaning, and the list goes on and on. It’s hard to count the people that are impacted in the end. You can make up your own scenarios all day long, the point is this – look around your community, look at the office space, apartment buildings, hotels, retail stores, and warehouses and know this, they are probably going to have a difficult time over the next few years keeping their doors open. If they close, the jobs will be lost. A quote from the report that says it best.
“A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American. Empty office complexes, hotels, and retail stores could lead directly to lost jobs. Foreclosures on apartment complexes could push families out of their residences, even if they had never missed a rent payment. Banks that suffer, or are afraid of suffering, commercial mortgage losses could grow even more reluctant to lend, which could in turn further reduce access to credit for more businesses and families and accelerate a negative economic cycle.”
What options do we have to divert this crisis?
Anticipating this crisis, we need to make policy changes to avoid this upcoming disaster. One government agency in a position to help is the Small Business Administration. Changes in the 504 loan program must be made. Increasing the SBA 504 loan program guarantee, along with working with the CDC to fill the gaps in the underwriting guidelines seems like a viable option.
In the end, there could be other ways to correct this problem. Some in congress would have the SBA lend directly to small business. Others would simply allow the business and banks to fail. You can leave your ideas and thoughts in the comment section below.
