NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT MANAGERS
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NAREIM
We believe that financial market participants and regulators can gain key insights from
ocean ecosystems – wolves in Yosemite Park would work too! The parallels between
financial markets and nature is recognized in an emerging new paradigm for financial
economics that focuses more on the evolutionary biology and ecology of markets rather
than the more traditional physicists' view.
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In this sense we question whether "over-
regulation" is necessary at this stage, as the evolutionary underpinnings of behavioral
finance would suggest that CMBS borrowers, bond investors, rating agencies all have
learned from past mistakes and have adapted their behavior, or have been eliminated
from the ecosystem. The next several years will likely bring heightened global capital
markets volatility largely due to disparate central banking activity and uncertainty about
the global economy. Commercial real estate (our reef) will need steady, well capitalized
and predictable capital market participants that are transacting (dining) at all risk levels
in order to prevent material capital markets induced dislocations. The regulatory bodies
that govern the legislation would surely benefit from a careful review of the ecological
impacts of over fishing.
Coral Reefs, Sharks, CMBS and the Law of Unintended Consequences
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"Bubble, Rubble, Finance in Trouble?" by A. Low, The Journal of Psychology and Financial Markets
06/2002; 3(2):76-86.
BANK AND CMBS LENDING LAGGING AND CONSTRAINED
BY BASEL III AND DODD-FRANK REGULATIONS
Bars show the relative recovery by lender type as average quarterly loan originations in 2014 and 2015 expressed
as a percentage of average quarterly originations in 2006 & 2007.
Source: Cornerstone based on data from the Mortgage Bankers Association and the Federal Reserve.
