Word: reals
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Dates: during 2000-2009
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...Capital Markets analyst Gerard Cassidy says the U.S. banking system at the end of 2006 was more exposed to commercial real estate than at any other time that regulators have measured. That exposure, Cassidy believes, could result in as many as 1,000 bank failures by the end of 2012. "All the indicators on commercial real estate that we have seen suggest that there are real problems ahead for regional banks," says Cassidy. "It is just going to take a little while to get there...
...larger banks did, regional banks made hundreds of billions of dollars in real estate loans. The smaller banks, though, lent mostly to commercial developers and home builders who, as business owners, have been able to hang on longer than the typical strapped consumer. But now that the recession is 16 months and counting, developers are facing the same problems that individual homeowners began facing two years ago. With vacancies in malls and office buildings around the country on the rise, more and more developers will be unable to pay their mortgages. And as those loans go bust, so too will...
...Some analysts believe that with the economy turning, commercial real estate loan losses will not be nearly as bad as Cassidy expects. But even under the government's baseline scenario for the banking industry, which was released as part of the stress test, U.S. banks could have as much as $84 billion in losses from commercial real estate. The government's adverse-case scenario suggests losses could reach as high as $200 billion...
...There are a large number of community banks that were very active in commercial real estate lending," says Robert Hartheimer, a Washington-based banking-industry consultant. "To the extent that the economy does not recover for a while, these types of loans are going to put a lot of stress on our nation's smaller banks...
...This is going to be a real challenge, and how he navigates that is really going to be the test,” he said. “That’s the biggest unanswered question right...