Falling Back

"I think we're in a recession again, or about to fall in it again," William Emmons told a group of realtors at lunch program of the St. Louis branch of CREW (Commercial Real Estate Women) on September 13.

Stressing that it was his own opinion, Emmons, an economist at the Federal Reserve Bank of St. Louis, pinned the blame on Congress for tipping the country back into a recession. It was "the fiasco" of the debt ceiling negotiations that did it, he said.

Unfortunately, the economy in the summer before the ill-starred debt ceiling debate, was "as good as it gets," he said. "This is the new normal," he said, while predicting that unemployment, which is at 11 percent in St. Louis city, will rise higher this year.

"The financial system is still licking its wounds and is not ready to bear into recovery," he said.

Tom Reeves, president of Pulaski Bank, followed Emmons with the comment that he can't see what will pull us out of recession.

"Government used to be the safety net for the economy, but with the federal and state governments laying off and cutting back, it is hard to prime the pump," he said. Exports might do it, but with the Chinese and Indian economies slowing down, "I'm very concerned," he said.

Banks have plenty of money to lend, he said, but they are holding back while they reassess risk and figure out new banking rules. Meanwhile, banks are less likely than before to team up and divide the risk on a project, because they don't trust each other.

"But, the biggest gorilla is simply the economy," he said.

On a hopeful note, Reeves said he thinks transactions are starting again.

"We made $150 million in new commercial commitments in the last six months," he said, including financing commitments for the St. Louis Center garage and the Grand Center TIF district.
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