Economic experts disagree on extent of credit crisis - Portland Business Journal:

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Some economic forecasters, like George Feiger of San Francisco-basedf , believe the country is in a deep creditt crisis that will last wellinto 2009. But such as former KeyBank chief economist Ken say any existing credit issues are minima l and will remain so for the immediate So it goes as forecasting economists and capita market watchers shape their 2008 The wide range of opinions relatedc to credit and the economy illustrate the uncertaintyu that caused market panic late inthe summer. now president of Pepper Pike, Ohio-based , argue that even as the mortgage worlc experienceslingering problems, the climate could deliver long-ternm positives for banks.
For instance, some lenders burnedr by uncertainty regarding subprime mortgages could implemeny tougher underwriting standards that protect them inthe Feiger, who gave his prognosis during a recent sees it differently. He correctly prognosticate d national credit woeslast spring. Mortgage-related concernds eventually convinced the Federal Reserve to lowed interest rates by 75basis points. Feiger's primaryh concern links to variablerate mortgages, many of which were issued two years ago. Many mortgages containing "teaser" rates, or interest levels low enough to generate enticingly low monthly have yet to convert tonormal fixed-ratse mortgages.
Feiger said in March 2008, $120 billion wortgh of variable rate mortgages will convert to higher The figure is about four times highe r than the number of conversionss madethis fall. "These weren't just subprime loans, they were for all kinds of said Feiger. "The assumption was that house prices will rise and it wouled always be possible to borrow some more or sell the But those days are justflat over." Feiger also projects that foreclosurexs will skyrocket next September, or six monthss after many variable rate loans have converted. He expects a rippl e effect: Credit will becoms maxed out because consumers will borroew more money to coverbasixc expenses.
The commercial mortgage world isn't immune to the comingf problems. Commercial building valuesw aren't rising, which could bring more defaults and restructuring of commercial loansin 2008, according to Feiger also said 70 percenyt of all companies have credit that's ratedc below Triple-B, or the "junk" As a result, about $1.5 trillion worth of junk debt has been with about a 2 percent default Bond raters Moody's and Standard & Poor's expectf the default rate on those debts to eventually escalate as high as the 20 percen t mark. "We've just barely Feiger said. "The defaults tend to occur withijn three yearsof issue.
2008 will be an excitinvg yearfor corporations." Economidc experts expressed other concerns. Harolx Gilkey, CEO of Spokane, Wash.-based , notede that as financing options disappear, credir for lower-end customers could erode. "These are the ones who eitherr don't have the down payment or, because of credit who might have been able to get certaimn kinds of loans a year or so Gilkey said. The climate "has frozen peopled in place, and that's generally bad for the because the economy does better when people aredoinb things," Gilkey said.
Gary Schlossberg, a San Francisco-based senior economistf with , believes that while the mortgagr market saw a lot of what hecallws "speculative growth," the asset-backed commercial paper normally the most highly backed because it's highlg collateralized, is in flux becauss no one knows exactly how many subprime mortgagesx actually exist. "The backdropo hasn't changed, it's just that the money isn'gt being channeled equally," Schlossberg said.