Bailout or Bust? by ProQuest

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Okay, so you heard the entire debate about the economic bailout plan (officially known as the Emergency Economic Stabilization Act), and are aware of all the "deals" made beforehand with AIG and some of the investment banks. You also heard that this "fix" was required to shore up the banks and get the credit markets moving again. Hearing that, you're probably thinking all will be right with the world now, and you can ignore last month's column about tight credit markets.

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Running the Business
                                                                                                                               By Garry Bartecki




                                                  Bailout or Bust?
   Continue to expect tight credit for the foreseeable future.

O      kay, so you heard the entire
       debate about the economic
bailout plan (officially known as the
                                          ter who you talk to, it will take time
                                          to get the changes in the bill through
                                          the system; in the meantime, credit
Emergency Economic Stabilization          is going to be tougher to get than
Act), and are aware of all the “deals”    it was before things hit the fan. So,
made beforehand with AIG and some         pretty much what we suggested last
of the investment banks. You also         month is still on the table. Things
heard that this “fix” was required to     may be a little better, but not to the
shore up the banks and get the credit     point where credit will be easy to get.
markets moving again. Hearing that,
you’re probably thinking all will be      Uncertainty in real
right with the world now, and you         estate lingers on
can ignore last month’s column                Banks are still nervous. They are
about tight credit markets.               still hesitant to loan funds to each
   Not gonna happen...                    other. The Federal transactions will
   After President Bush signed the        take some time to complete, which
bill and I had a chance to listen to      will push out the recovery time. And
various “experts,” I went back to Ken     like it or not, real estate — and thus
Hedlund and Robert Frentzel, con-         construction — will not be high on
tributors to last month’s column, for     any bank’s list when they sit down
their insight. Unfortunately, no mat-     to discuss what markets to hit




                                                                                    going forward.                              • get new work;
                                                                                       Banks will also be more cautious         • finance new work;
                                                                                    with their lending policies. They will      • control increasing costs;
                                                                                    be pushing a de-leveraging model,           • and complete the work you’ve
                                                                                    which will require more collateral       bid on so that you make a profit and
                                                                                    and less debt to avoid over-extending    generate enough cash flow to cover
                                                                                    themselves based on conservative         both variable and fixed costs.
                                          When mate-                                lending standards.                          Not an easy task.
                                         rial gets moist                               A recent survey of real estate           The end result is that nothing
                                           and sticky                               executives suggests the majority are     really has changed. Your ability to get
                                         you know the                               writing off 2009, with 92% of respon-    work and make a dollar is dependent
                                           difference.                              dents holding a bearish outlook for      on where you work and what you do.
                                                                                    the next 12 months. Of this group,       Some contractors will act as if noth-
                                                                                    62% believe it will be 2010 before the   ing is going on. But most are feeling
                                                                                    real estate market stabilizes, with      the pain and are doing what they can
                             
								
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