AIA Urges Senate to Put Partisanship Aside and Pass Legislation to Help Solve the Credit Crunch Print
Monday, 02 August 2010 09:59

The American Institute of Architects last week called on Congress to address the persistent lack of credit that has exacerbated the economic crisis and disproportionately affected the design and construction industry.

“The design and construction sector in which architects compete has seen employment drop by 25 percent since the recession began in 2007,” said Paul Mendelsohn, AIA Vice President, Government and Community Relations. “The AIA Architecture Billings Index has remained in a negative state for nearly 2 years.

“The industry continues to be affected by an extremely risk-averse attitude on the part of lending institutions,” Mendelsohn said. “This is especially true for large construction projects.”

The AIA submitted its statement today to the House Financial Services Committee ahead of its hearing that will examine the alternatives available to promoting liquidity in the commercial real estate markets, and as the Senate continued debating small business relief legislation. The AIA congratulated the Committee for passing legislation on a voice vote that establishes a regulatory framework for a U.S. covered bond market. Such a market will increase liquidity in many credit markets by giving banks access to a separate source of funds for secured lending.
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The AIA reiterated its support for the administration’s proposal to create a $30 billion fund to community banks. Such a fund will help architecture firms that need lines of credit to support day-to-day activities in between projects. It will also be available for clients who are having a hard time financing building projects.

“This bill has been held up by partisan wrangling in the Senate,” said Mendelsohn. “But the lack of access to credit is not a partisan issue. It is affecting blue-state and red-state entrepreneurs alike.”

Creating a loan fund to support community banks and provide a supply of credit will not be enough, the AIA said in its statement. Commercial real-estate values are 42 percent below their 2007 peak. It is estimated that nearly two-thirds of commercial real-estate loans maturing between now and 2014 are underwater. According to a recent story in the Wall Street Journal, banks are holding some $176 billion in souring commercial-real-estate loans.

The AIA supports language included in the House-passed small business bill, authored by Reps. Ed Perlmutter (D-CO) and Mike Coffman (R-CO), to let small community banks amortize commercial real estate losses over a longer period if they begin to lend.

“The House passed this bipartisan amendment. We hope that this common-sense provision remains a part of the small business bill,” added Mendelsohn.

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