Lehman Is One of Many Financial Institutions That Will Fail in 2009, Says Industry Expert

By Anuradha Kher, Online News EditorNew York–Lehman Brothers and Washington Mutual are sure to going down the path that IndyMac did, according to T.J. Wojtas, founder of the Buyers Equity Fund. “What you see happening is a consolidation of power among institutions that are not failing and faltering. What is going on now is similar to what happened in 1907 when JP Morgan Chase made a run on the banks,” Wojtas tells MHN.Wojtas predicts that 400 institutions will fail during 2009. “Small community banks will follow the big banks down this path. The situation was getting too much out of control and this is the much-needed controls into the hands of the Federal Reserve,” he says.If his prediction becomes reality, the real estate market will have fewer investment and financing products to choose. “There will be a tiny growth of property and it will take us at least three years to recover from this economy. Confidence from foreign investors in the U.S. is falling rapidly. The overseas investors who have been syndicating real estate deals in the U.S.  are already slowing down.”The good news, he believes is that rentals will boom. “One because people won’t be able to buy as much and two, because families will break. Sadly, that is the reality–divorces go up when money isn’t coming in,” adds Wojtas.Meanwhile, Jeffrey Day, managing director and co-head of Deutsche Bank Berkshire Mortgage (DBBM) has completely the opposite view. He tells MHN, “Whatever happens with Lehman Brothers, I don’t believe it will have any kind of resounding impact on the market. I think the market has become desensitized to these kinds of issues.”He also wonders how much stamina and ammunition the government has left to do anything about a Lehman-like situation. However, Day does agree with Wojtas that things are about to get worse before they get better. “I am generally a free market proponent. I believe that the markets need to find their own levels. I don’t believe that we have reached the bottom yet. We are currently in a recession and the economy is suffering, domestically as well as globally, and this is definitely not the type of environment in which home prices will likely rally.”