Money Men Say It's Time To Pay Piper

by George Waldon  on Monday, Sep. 29, 2008 12:00 am  

"We do have a workable solution, and it's in process," he said. "This isn't a bailout. It's a purchase of assets, and it will work.

"The cost for what you have to do for the system is quite reasonable. You have to get the mortgages moving because they are at the epicenter of everything."

Financial service companies have written down about $300 billion in bad mortgage investments, and some forecasts have that figure climbing to $1 trillion.

The write-downs and financial meltdowns, though painful, are an expected outgrowth of a market seeking equilibrium.

"It will clean the system," Alex Lieblong said. "This whole thing is human nature. Greed is a terrible thing. The blame extends from Wall Street to Main Street. There is so much fault to go around it's incredible.

"All you had to do to get a mortgage was to fog a mirror. There was so much fraud going on out there it was scary. Now the market will overcorrect the other way."

Lax credit standards are expected to give way to more conservative standards, as the pendulum of public opinion swings back.

"It is going to be a tighter underwriting process, as it should have been all along," Cunningham said. "You're going to see a shift back to more of a deposit-based lending system. It wouldn't surprise me if we lost a third of the banks because the nation is over-banked. You may see a market where the banks eat their own."

Whatever comes of the shakeout, Lieblong is confident the financial markets and the economy eventually will bounce back.

"You have to go back and put it in perspective," he said. "Capitalism, sooner or later, works its magic. You just don't want to be overleveraged.

"Capital is the most precious thing you can have – not in life, but in investing."

Lieblong understands how the ups and downs in U.S. markets shake the global economy but doesn't see the current economic travails as a nation teetering on the abyss.

He cites a personal observation while touring hotel investments as a favorable sign of the times. A strong contingent of Eastern Europeans populated the support staffs.

"When I see Americans going to Eastern Europe [to find a job], I'll start worrying," Lieblong said. "Don't ever sellthis country short for the long run."



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