While I found the Goldman hearings to be a travesty, and a rerun of the Army McCarthy hearings of 1954, the underlying issue is the Street tried to make real estate into a commodity that can be traded and hedged like a commodity. Instead of trying to understand any of what was really happening, Levin and McCaskill and the other clearly uninformed senators simply wanted to have political theater and denigrate Goldman.
Real estate is not a commodity. It is an asset which does not trade or physically move. It's value does not shift hourly. There is not a liquid constant world market for a building or for a mortgage. It is not oil, scrap, or corn. Therein lies the real underlying problem. Each building is unique. It is different by many measures form the one even next door. Commodities are exactly the same. Oil is oil. Gold is gold. There may be differences by type of oil, but Brent North Sea is essentially all the same. Just because a building has a mortgage on it does not make that mortgage the same as other mortgages.
When we created the initial hotel mortgage CMBS programs in 1993, we were very clear in our underwriting that a Ramada was not a Ritz Carlton. A 25 year old exterior corridor hotel is not a new Courtyard. A hotel is not just a hotel and it is clearly not a retail center, nor a package of home mortgages.
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