Comments on: Commercial Real Estate: Credit Crisis #2?

By: David Leeman

David Leeman — Wed, 08 Sep 2010 06:17:00 +0000

Well, I forgot to address your question about the FDIC and REMIC revisions. I don't think the FDIC revisions will affect loan liquidation lags; my understanding is that they relaxed qualification of what CRE loans is considered impaired, so that banks didn't need to reserve capital against them. Perhaps 2010 will finally be the watershed year. Here is another good stat: In 2009, the FDIC alone sold about 3,500 CRE loans with a book value of more than $6.1 billion. That compares to CRE loans sales in 2008 of just $153 million. Its good news to buy a home for you for you now.

By: The Commercial Real Estate Market Remains Distressed | Portfolio Real Estate Observer

Fri, 18 Dec 2009 00:19:22 +0000

[...] Commercial Real Estate: Credit Crisis #2? (hsh.com) [...]

By: Tim Manni

Tim Manni — Mon, 05 Oct 2009 15:14:23 +0000

Mona,

I think you hit the nail on the head here Mona. There’s no denying that a serious crisis is brewing in the commercial real estate industry. However, any type of assistance is going to be a tough, if not impossible, sell to consumers. How many more bailouts can we fund??? However, this sentiment that Washington has stirred in the consumer is dangerous to a degree…we can’t afford another real estate crisis.

There is some activity in the banking industry regarding the interest of private money, which is a good sign that we can again operate without govt. assistance. Again, I like your point that the govt needs to focus on getting taxpayers repaid for loans it has already lent. That’s taxpayer money and we deserve to know when we’re getting it back.

Great comment, please visit us again soon.

Thanks,
Tim

By: Mona

Mona — Sun, 04 Oct 2009 23:51:35 +0000

Tim, I agree that we can’t decide to bailout banks on grounds on wether they deserve it or not. But we can’t either use the basis if the “tax payers can afford it or not”. We can’t! We have already spend way to much money on bailing out banks. But the sad sitaution is that we don’t have much choice – letting financial institutions go bankrupt would have such serious effects on the economy that it would harm us all severly. Just look at what happend with the World Ecobomy when Lehman Brothers were let go.

What we should focus on though, is securing assets in the banks that can be sold later on, for the government to retrieve it’s money.

By: Tim Manni

Tim Manni — Fri, 18 Sep 2009 17:23:28 +0000

Hey Lucia,

Well, if the FDIC is receiving a loan from the Treasury, then they will have to pay it back (they have had to do this before). To generate those repayment costs, the FDIC raises the fees they charge to the banks. Banks then offset those higher fees by raising the fees they charge to consumers. Everything runs downhill.

It may save the taxpayer if their bank collapses and the FDIC is there to pick up the pieces, but it also may result in higher costs for taxpayers along the way.

Good question,
Tim

By: Lucia

Lucia — Fri, 18 Sep 2009 17:08:15 +0000

It seems the FDIC is borrowing from the Treasury again to refill their reserves. Does this save the taxpayer?

By: Tim Manni

Tim Manni — Fri, 18 Sep 2009 15:44:35 +0000

Lucia,

Great additions as usual. We agree, many small and mid-size banks are the backbone of many communities and the bizs that make them run. For the most part, the small and mid-size banks played by the rules and were less risky than their larger counterparts. As we said, the failure of commercial real estate is recessionary based.

“However, I don’t believe any “bailout” for these banks can be based on whether or not they “deserve it”, but whether or not the FDIC or the taxpayer can afford it.” — But will taxpayers accept this? Can taxpayers handle another bailout???

Thanks,
Tim

By: Lucia

Lucia — Thu, 17 Sep 2009 22:09:55 +0000

I think small and midsized banks are the backbone of small and midsized communities. Their investment in commercial properties is based on meeting community retail needs and failure of commercial property owners to refinance their loans appears directly related to recessionary pressures. However, I don’t believe any “bailout” for these banks can be based on whether or not they “deserve it”, but whether or not the FDIC or the taxpayer can afford it. If recessionary pressures cause the banks to fail, then the same pressures could cause the taxpayer to fail to bail out their banks or the FDIC.

By: donmcclain (Don McClain)

donmcclain (Don McClain) — Thu, 17 Sep 2009 15:37:43 +0000

Commercial Real Estate: Credit Crisis #2? – http://blog.hsh.com/?p=5828