Thursday, July 23, 2009

What? No Green Shoots?

By Jeff Diamond - On Tuesday, in response to Rep. Bachus' question on the poor condition of the commercial real estate market, Fed Chair Ben Bernanke said, "As the recession’s gotten worse in the last six months or so, we’re seeing increased vacancy, declining rents, falling prices -- and so, more pressure on commercial real estate."

Let's recap... In a moment of unscripted candor, Ben Bernanke said that the recession has worsened over the last six months! Despite all his spin about green shoots and stabilization, he very matter of factly stated that things are continuing to worsen. He went on to say that our government is considering measures to help out commercial real estate in the future. Is there any sector of the U.S. economy that will be allowed to correct? Does everything pose a systemic risk? I continue to be amazed at what lengths the Fed and the Treasury will go to prevent markets from imposing discipline or penalties on poor risk decisions.

If you listen carefully, however, you can occasionally glean the truth even from Bernanke... The economy is still worsening. It's a matter of fact. No one questioned Bernanke's description, since we all know it's true. Green shoots are a lie, a very convenient lie, but a lie that our government considers necessary. They need to provide the rationale for more ill-considered risk-taking among investors. That's the only hope they've got to whip this recession that has "worsened over the last six months."