Realty Leaders Tell Bush Banks Choke the Economy
WASHINGTON - Bankers continue to restrain the economic recovery by restricting real estate credit, a dozen realty industry leaders charged in a meeting Monday with President Bush and his top economic advisers.
"Unless the banks open up credit, this country is going to die," National Association of Home Builders president Mark Tipton said he had told Mr. Bush. "Banks are not only not making the loans, they are calling loans to builders."
Bank regulators are "scaring the hell out of the banks," added Angelo Mozilo, president of the Mortgage Bankers Association of America.
100% Cash Collateral Rejected
Robert C. Larson, president of the National Realty Committee and vice chairman of the Taubman Companies, said he told Mr. Bush: "The chief credit officer of a money-center bank told me that they wouldn't make a real estate loan even if it were fully secured by cash."
Mr. Larson, according to people who attended the White House session, urged Mr. Bush personally to impress upon bank examiners the pitfalls of scaring banks off real estate lending. He suggested that the President address a meeting of bank examiners from all the agencies in Baltimore Dec. 16.
At a similar meeting Oct. 17, bankers told Mr. Bush credit is not tight and lending is down because fewer good borrowers are seeking credit.
Mr. Bush listened intently Monday, took notes, and asked a lot of questions, according to Mr. Mozilo.
"The message," Mr. Mozilo said, "is that real estate, including housing, has to be put on the top of his agenda and he has to lead the way."
Mr. Bush said he "is ready to take the rap" if whatever remedies he proposes are viewed as helping the rich, according to Mr. Mozilo. He added, "You must get this country on the move, and that is not going to happen by giving $50 to poor people."
The real estate representatives also asked the President to delay imposition of risk-based capital regulations on banks. The final rule, which requires an 8% capital-to-asset ratio, is to take effect at the end of 1992.
"I think the administration is extremely sympathetic" to postponing the deadline, said Dorcas T. Halfant, president of the National Association of Realtors. The Treasury Department has not pushed for a delay but does support a broadening in the definition of capital.
Tax Break Desired
The real estate industry desperately wants the tax code changed to let real estate professionals write off expenses, including depreciation, associated with properties they own. The inability to write off these "passive losses" devalued real estate by 3% to 7%, Ms. Halfant said she told Mr. Bush.
Ms. Halfant linked her passive-loss complaint to the credit crunch. If a property owner must write down a property too much, she said, the lender eventually must foreclose. And as a bank piles up property, it is less interested in making realty loans.
Stephen P. Hokanson, president of the Building Owners and Managers Association International and president and chief executive of Hokanson Cos., Indianapolis, said Mr. Bush seemed "genuinely surprised" that lower interest rates have not spurred a real estate recovery, particularly in residential.