As September 2008 drew to a close, we sat down for our quarterly conversation with Massey Knakal Chairman, Robert Knakal to discuss his views on the economy and how these factors are affecting our local New York City building sales market. This interview replaces Mr. Knakal’s “Commentary” for this week which will resume next Monday night. We hope you find this interview informative and timely.
Question: For the past couple of weeks everyone has been talking about is the 700 billion dollar bail out plan. It passed last Friday. How will this plan affect the real estate market?
Answer: The first thing I would like to say is that I feel the plan should not have been called a “bailout”. Secretary Paulson, Chairman Bernanke and the present administration could have done a much better job of conveying the rationale for this plan, its importance to the American people and the implications for the world’s financial markets. That is why it failed to pass the house last Monday. An explanation of the reprurcusions of the evaporation of credit on all Americans should have been conveyed more clearly right from the beginning. That being said, it is thought that this plan will provide liquidity to the credit markets from which the real estate market would benefit.
Question: Do you think the plan will succeed?
Answer: Well, the question is which objectives the plan will succeed in achieving. Strengthening balance sheets of financial institutions holding toxic assets will be achieved but, will it solve the credit crisis? I am not convinced. That being said, the plan may not be perfect but it was absolutely necessary. The Treasury department will, likely, move quickly to start buying distressed assets from struggling financial institutions although the impact of these acquisitions with respect to enhancing liquidity may not be felt for some time. There are still many details of the plan which are unclear such as who will oversee the program, how it will be administered and, most importantly, what the government will pay for these distressed assets. Some economists have indicated that the taxpayers could actually make a profit on these “investments”. That will all be a function of what is paid for the securities.
Click here to read the full Conversation with the Chairman.