‘Key Issue Is Availability of Credit’

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Chris Lewis, General Partner


Riordan Lewis & Haden, Los Angeles

The federal government took some big steps; I’d give them a lot of kudos. They’ve done a lot to stabilize our financial markets. In the mergers and acquisitions field, the most important issue is the availability of credit. If credit diminishes greatly or terms get more difficult, the willingness and ability to do transactions and the number of transactions will diminish. There are very few large deals going on right now. The deals that have been getting done are smaller.

On the local economy, the key issue is the availability of credit for the common man. If that is greatly cut short, it hurts the ability of people to buy homes, cars and cuts into consumer spending. If companies can’t get the credit they need, it will cause a general slowing of the economy. They won’t be able to expand.

As for Los Angeles, I don’t think it will be as affected as New York where all the banks are located. We’re not as major a financial center.


Kevin Klowden, Managing Economist


Milken Institute, Santa Monica

With Fannie Mae and Freddie Mac falling under government control, the mortgage and housing markets will continue to stagnate, which should continue to hurt new home sales and force home sellers to keep homes on the market for much longer as buyers no longer have access to expedited financing. Businesses looking for credit to expand will have fewer options, particularly from lenders with high exposure.

Layoffs are less likely than a local slowing of the economy, matching the national trend. But if businesses lose revolving credit or margins become too tight and they can’t get short-term credit, it is certainly possible to see layoffs.

The good news on the job front is that most of the jobs to lose in finance have already been lost. IndyMac is gone, Countrywide is bought up, the large local banks are more than a decade gone, and most of the other financial firms have already trimmed locally. The main concern is what happens if Washington Mutual is acquired, resulting in losses due to consolidation.


Michael H. Salama, Vice President,


Tax Administration and Senior Tax Counsel

The Walt Disney Co.

I do believe those media and entertainment concerns with a robust portfolio of franchises, and those with the flexibility to leverage those franchises over different platforms, ought to be in a strong position.

However, one might assume that the availability of financing will be more challenging for some. This may put pressure on those Los Angeles basin enterprises that are heavily reliant upon third-party funds to produce new film content or entertainment experiences.

I would not venture to speculate on the short-term strength of the dollar as a result of the bailout other than to observe that a decline in the dollar may present correlative opportunities for foreign consumer spending which may benefit more diverse media and entertainment companies with a less likely upside for purely local endeavors.


Randy Gordon, Chief Executive


Long Beach Chamber of Commerce

The ramifications of the current meltdown will likely result in a sustained slowing of development within our region.

With our region’s reliance on international markets, our economic growth is highly reliant on access to loans, which often comes in the form of bank lines of credit and term loans, venture funds and other lending sources, including federal and state programs. If these financial resources continue to be unable to readily lend funds, businesses will be unable to invest in new property and employees and will run the risk of being forced to downsize. They may even lack enough capital to keep afloat during any sustained economic downturn.

Our region also has numerous infrastructure plans on the drawing board, which may be delayed as a result of this financial crisis.




Russell Goldsmith, Chief Executive


City National Bank

Housing lies at the root of today’s economic challenges. Home sales remain slow, and prices continue to decline. The inventory of homes is still excessive, and unemployment continues to rise.

As a result, this economy, in my view, will require not only time to heal but would also benefit from a second federal fiscal stimulus plan that reduces our dependence on foreign oil while stimulating jobs and investment by fostering conservation and alternative energy.

In addition, we here in Los Angeles need to do all that we can by fully implementing the recommendations of the L.A. Economy and Jobs Committee, which I chaired for Mayor Villaraigosa. That report calls for much more proactive local government fostering public-private partnerships that will create more jobs, grow the economy and improve transportation and the environment and the report details 100 specific recommendations to do so.


Lew Horne,



Executive Managing Director, Greater Los Angeles Region

CB Richard Ellis Group Inc.

While it is premature to assess fully the office space impact of these unfolding events, we know that there will be two dimensions to these events that will impact the local market.

The first dimension is the service companies themselves, whose individual situations could result in space coming back to the market which would potentially impact our vacancy rates in the Century City, Downtown and San Fernando Valley submarkets where the offices of many of these financial institutions are concentrated. The second dimension is the changing face of investment banking and all financial services, which has created a market outlook that is dramatically different from the optimistic one we saw last year.

As uncertainty looms, companies that don’t have to do deals will delay; financial institutions are lending with much more conservative underwriting standards where there is less of a reliance on rental growth and more interest in the equity investment and the security of the asset; and landlords have shifted their focus from pushing up rents, to maintaining occupancy levels and protecting their tenant base.

However, I do believe that overall, the markets fundamentals in most cases are generally healthy with relatively low vacancy rates, a growing population and an enduring attractiveness to Southern California. I am optimistic about the long-term future.


Charles Higgins,


Associate Professor of Finance

Loyola Marymount University

In Southern California, we have seen declines in real estate values particularly in San Bernardino County and especially in Moreno Valley. In contrast some areas have been relatively immune such as the Koreatown area of Los Angeles, and which provided some of the better post-bust returns when the previous crisis abated.

When one considers the choice between living in the city versus the suburbs, the cost of commuting becomes a strong determinant of relative real estate values. The higher costs for transportation, coupled with higher unemployment rates, only exacerbate the decrease in suburban real estate values for communities.

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