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

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Some economic forecasters, like George Feigef of San Francisco-based , believe the country is in a deep credit crisiss that will last wellinto 2009. But such as former KeyBank chief economistKen Mayland, say any existinvg credit issues are minimal and will remain so for the immediates future. So it goes as forecastinf economists and capital market watchers shapwe their2008 outlooks. The wide range of opinions related to credigt and the economy illustrate the uncertaintyg that caused market panic late inthe Mayland, now president of Pepper Pike, Ohio-based , arguesw that even as the mortgage worlxd experiences lingering problems, the climate could deliver long-terj positives for banks.
For instance, some lenders burneds by uncertainty regarding subprimed mortgages could implement tougher underwriting standards that protecy them inthe future. Feiger, who gave his prognosi during a recent seesit differently. He correctly prognosticated national credit woeslast Mortgage-related concerns eventually convinced the Federapl Reserve to lower interest rates by 75 basix points. Feiger's primary concern links to variablewrate mortgages, many of which were issuex two years ago. Many mortgages containing rates, or interest levels low enougg to generate enticingly lowmonthly payments, have yet to convery to normal fixed-rate mortgages.
Feiger said in March $120 billion worth of variable rate mortgages will convergt tohigher rates. The figure is about four times higherf than the number of conversions madethis "These weren't just subprime loans, they were for all kindsd of loans," said Feiger. "The assumption was that house prices will rise and it would always be possibles to borrow some more or sell the But those days are justflat over." Feiger also projects that foreclosures will skyrocket next September, or six month s after many variable rate loans have He expects a ripple effect: Credit will becomre maxed out because consumers will borrow more money to cover basic expenses.
The commercial mortgage world isn't immune to the cominyg problems. Commercial building values aren't rising, whichb could bring more defaultx and restructuring of commercial loans in accordingto Feiger. Feiger also said 70 percent of all companies havecredit that's rated below Triple-B, or the "junk" As a result, about $1.5 trillion worth of junk debt has been with about a 2 perceng default rate. Bond raters Moody's and Standard & Poor'ws expect the default rate on those debtsw to eventually escalate as high as the 20percent "We've just barely begun," Feiger said. "The defaults tend to occurd within three yearsof issue.
2008 will be an excitinbg yearfor corporations." Economic experte expressed other concerns. Harold Gilkey, CEO of Wash.-based , noted that as financinv options disappear, credit for lower-end customers could erode. "Thesr are the ones who either don'gt have the down payment or, because of credig problems, who might have been able to get certaibn kinds of loans a year orso ago," Gilkey The climate "has frozen people in place, and that's generallyu bad for the economy, becaus the economy does better when people are doing Gilkey said.
Gary a San Francisco-based senior economist with , believes that whil the mortgage market saw a lot of what hecalls "speculative the asset-backed commercial paper market, normally the most highly backedd because it's highly collateralized, is in flux because no one knowxs exactly how many subprime mortgageds actually exist. "The backdrop hasn'gt changed, it's just that the monet isn't being channeled equally," Schlossberg said.