The Line of Pigs at the Trough is Up the Hill

Property developers are the latest to come hat in hand looking for government aid. They are asking to be included in a new $200 billion loan program initially created to help the markets for car loans, student loans, and credit card debt.

Unlike financial institutions (and arguably auto companies), if a commercial real estate property defaults on its debt, its business doesn't cease to operate. The real estate doesn't disappear, and the property will continue to "operate" and provide value to its tenants. Instead, the developers lose most if not all of their equity as creditors' claims are restructured, and creditors most likely also lose money.

And if in the days ahead we hear of risks to banks that real estate loan defaults entail, then that specific problem can be addressed directly with the bank(s) effected through actions like the good bank / bad bank restructuring recently undertaken with Citigroup.

The government must stop its bailout activity, both to protect taxpayers and to encourage businesses to focus on solutions to their problems away from a political solution.