How Will the Financial Crisis Affect Chicago?

Crain’s has a few reports on the impact of the ongoing financial crisis on Chicago.

From “Chicago Braces for Lehman, Merrill Impact” [Crain’s, Sep 15, 2008]:

Lehman has about 550 local employees, and Merrill Lynch employs hundreds as well. Both firms are based in New York.

“Ultimately, it’s going to have a very devastating impact on the region,” says Laleen Doerrer, a Lehman vice-president in Chicago who deals with hedge-fund customers. “There just aren’t the big employers to pick up the slack. We’ve watched our financial services industry get cannibalized by New York and Europe.”

Inside Lehman, “there’s a certain amount (of), ‘I can’t believe this has happened,’ ” says Ms. Doerrer, the Chicago-based vice-president. And the shockwaves won’t be confined to people within the company. “It’ll affect some of the priciest real estate in town.”

Crain’s also covered what will happen to business loans as credit dries up.

Loan Rates to Rise from Financial Turmoil” [Crain’s, Sep 15, 2008]:

Rates and terms on business loans in Chicago, already higher and tougher this year as banks’ tolerance for risk shrinks, will become even more onerous for commercial customers following the demise of Lehman Bros. Holdings Inc. and the sale of Merrill Lynch & Co., bankers say.

The ripple effects are being felt in markets all over the country, including Chicago: In addition to the psychological blow to the markets, the loss of a big player like Lehman Brothers, with a balance sheet of $600 billion, takes capital out of the financial system, leaving less to go around.

“The whole thing is shrinking; the financial system is shrinking,” says Mitchell Feiger, CEO of Chicago-based MB Financial Inc., a commercial lender with $8.4 billion in assets. “It’s going to get worse.”

7 Responses to “How Will the Financial Crisis Affect Chicago?”

  1. The LEH/MER news is only a symptom of massive deleveraging that’s happening in the world. Though Chicago isn’t as f**** as NYC/NYS as it’s more diversified.

    I’ve been following the 60614/cribchatter prices (cuz I want to move) and prices barely have moved as sellers are optimistic and holding out for a white knight.

    I went to an open house were a seller told me that her friends said that the seller was crazy for dropping her asking price from $725k to $699k. (and even at $699k I felt her home was overpriced.)

    Once sellers realize that buyers in the $800k+ market are hunkering down, jumbo mortages are drying up, and if you aren’t preparing to close a deal now you’ll be stuck with your prop over the winter, prices will start dropping across the board.

    Naturally no one knows the extent to which prices will drop but it will be significant as so far upper bracket prices have been stable, but I’m preaching to the choir.

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  2. What contantly amazes me is the positive outlook for housing many have for 2009 while this is all going on. Does anyone think housing will turn a corner will the financial market is in crisis and the economy is slipping closer to recession every day?

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  3. Laleen is an idiot. No competing employer is going to hire her now that her name is all over for speaking to the media.

    Also before we feel bad for these people we should remember that the average size Wall St bonus check is around 300k. Its not our fault if these people weren’t diligent savers for rainy days.

    Lehman was always an uppity and arrogant firm. The last firm on wall street to require suits and almost cultlike in its culture and worship of their CEO. You should see their recruiting videos where they show one trader walking around the floor swinging a baseball bat. Tacky indeed.

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  4. “It’ll affect some of the priciest real estate in town.”

    Patience is being rewarded. Maybe this will finally start the downward trend for higher end homes in Chicago.

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  5. About the only thing the market has going for it is this financial crisis has pushed the yield on the 10-year and 30-year treasury down to historic lows. This should affect the prime non-jumbo mortgage market. Still this is minor compared to all the other affects working against it.

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  6. “About the only thing the market has going for it is this financial crisis has pushed the yield on the 10-year and 30-year treasury down to historic lows. This should affect the prime non-jumbo mortgage market. Still this is minor compared to all the other affects working against it.”

    Just wait, if the fed decides to start bailing out the companies, and we haven’t felt the effects of the Fannie/Freddie infusion of money, these treasury rates will skyrocket. I won’t be surprised if we see interest rates in the 9-10% range this time next year.

    then we can REALLY talk about a housing slump…

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  7. Those that made that kind of money and didn’t save…waaaaaa waaaaa, too bad.

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