Washington has a major impact on much of what we do as real estate developers and owners. Between EPA, OSHSA, EEOC, and other agencies, there are numerous rules, laws, regulations to follow, many of which make no sense, and all of which cost us money. How Washington functions also is a major issue for all of us as we need a functional government that operates within the law so at least we know the rules. We now have a president who has changed the rule of law and the precedent of the constitution by making illegal changes to Obamacare and now to immigration laws. This is not a minor issue for us nor for the country. We no longer know what rules may be followed, created by fiat, or just outright ignored at the whim of Obama.
So what does this mean for CRE. First, it means a lot to all citizens because we now have the imperial president who thinks if he does not get what he wants he can just change the laws to suit himself. He has already lost several cases in court where his disregard for the law was stopped. However now we have the making of a true constitutional crisis, which is now before the Supreme Court, despite he and Harry Reid packing the Washington DC Appeal court to try to stop the overturning of a key part of Obamacare. The move by Obama to change immigration law has taken a great opportunity he had to work with Congress for two years and to accomplish some real immigration changes, and to clean up Obamacare and other laws. Now instead we have worse acrimony than ever, and many in Congress who will be out to show Obama that Congress still makes laws, not him,. The result will be not much gets done on key issues like tax reform.
Had Obama chosen to follow the lead of his predecessors, and abide by the midterm election results, we may have had real tax reform, and easing of EPA onerous rules, an easing of onerous clean air regulation, and most important to CRE, an easing of Dodd Frank and an ability of borrowers to get loans for new homes. Instead of major banks hiring thousands of compliance and legal staff, they could have used that money to make more loans. Most of the large banks are backing off home mortgages because they have just been badly burned and had political onerous fines levied. Obama and Holder may feel great for fining Jamie Dimon $15 billion and trying to get him fired, but all they got was him being applauded by the board and a large raise, and the lower staff being cut or had their bonuses reduced, and productive spending by the bank cut drastically. For most Americans they can no longer get a regular mortgage from Chase or B of A, or other large banks.
What has made America really different is investors and the citizens could generally count on this being a country of laws, with a constitution that was fair and impartial. That is no longer the case. If this precedent is allowed to stand, what things will the next president decide to change on his own, Just imagine if Elizabeth Warren were president with this unilateral power. The economy and banking would be destroyed in no time. There are at least 25 videos of Obama saying he could not legally do what he did. He could have done this anytime over six years. He could have had his Democratic Congress pass it in 2008-9, he could have done this before the election. It was a purely cynical political action sanctioned by Holder's team on grounds of prosecutorial discretion. Maybe the next president will use prosecutorial discretion to say SEC rules no longer will be used to prosecute anyone. Or maybe he says EB-5 is no longer needed because all you now need to do is walk across the border and get your work permit and drivers license, free medical care, and food stamps. Why invest $500,000 when you just walk over the border with no fear of deportation. And you can do anything you want.
It is not about the substance of fixing the immigration problems. It is about the rule of law and legal process and the constitution. That is a real crisis unless the courts rule his Obamacare and immigration actions unconstitutional.
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Joel Ross
Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.
