by Calculated Risk on 12/22/2008 10:43:00 AM

From the WSJ: Developers Ask U.S. for Bailout as Massive Debt Looms

With a record amount of commercial real-estate debt coming due, some of the country's biggest property developers have become the latest to go hat-in-hand to the government for assistance.

They're warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years -- with about $160 billion maturing in the next year.

Although the headline says "developers" this is really about property investors who bought commercial buildings at the price peak and are now underwater. But say the owners default and the properties are transferred to the bondholders - what is the risk to the economy? None.

With the automakers there was a concern that a large number of jobs would be lost without a bailout. How many jobs will be lost if the ownership of an office building or mall changes? Very few.

The article suggests there is a concern that some owners will not be able to refinance because of the credit crisis, even though their properties have strong positive cash flow. But that seems like a liquidity issue for the Fed and the banks, and doesn't seem to require a bailout from the Treasury.

I don't see the argument for a bailout.