The Wall Street Journal ran a good story on Wednesday about the Federal Reserveâs concerns that US banks have been slow to take losses on their commercial real-estate loans.
According to the WSJ, the Fed expressed its concerns in a presentation to banking regulators in September:
The remarks suggest that banking regulators are girding for a rerun of the housing-related losses now slamming thousands of banks that failed to set aside enough capital during the boom to cushion themselves when the bubble burst. âBanks will be slow to recognize the severity of the loss â just as they were in residential,â according to the Fed presentation, which was reviewed by The Wall Street Journal.
Here, however, is the kicker (emphasis ours):
In another sign that many U.S. financial institutions are inadequately protected against potential losses on commercial real-estate loans, banks with heavy exposure to such loans set aside just 38 cents in reserves during the second quarter for every $1 in bad loans, according to an analysis of regulatory filings by The Wall Street Journal. That is a sharp decline from $1.58 in reserves for every $1 in bad loans from the beginning of 2007.
The Journalâs analysis includes more than 800 banks that reported having more half of their loans tied up in commercial real-estate, ranging from apartments to office buildings to warehouses.
Gulp.
Fortunately for the bulls out there, CNBC managed to find some âvultures going into this very distressed area and finding opportunitiesâ. Click on the image below for a video featuring Barry Sternlicht, chairman and CEO of Starwood Capital on opportunities in commercial real estate:
Screenshot of Barry Sternlicht, chairman and CEO of Starwood Capital on CNBC :
http://www.cnbc.com/id/15840232?video=1286073669&play=1
Source :
http://ftalphaville.ft.com/blog/200...enough-about-commercial-real-estate-fed-says/
Maybe the FED should contact Goldman and ask for a "sober " risk solution ?
According to the WSJ, the Fed expressed its concerns in a presentation to banking regulators in September:
The remarks suggest that banking regulators are girding for a rerun of the housing-related losses now slamming thousands of banks that failed to set aside enough capital during the boom to cushion themselves when the bubble burst. âBanks will be slow to recognize the severity of the loss â just as they were in residential,â according to the Fed presentation, which was reviewed by The Wall Street Journal.
Here, however, is the kicker (emphasis ours):
In another sign that many U.S. financial institutions are inadequately protected against potential losses on commercial real-estate loans, banks with heavy exposure to such loans set aside just 38 cents in reserves during the second quarter for every $1 in bad loans, according to an analysis of regulatory filings by The Wall Street Journal. That is a sharp decline from $1.58 in reserves for every $1 in bad loans from the beginning of 2007.
The Journalâs analysis includes more than 800 banks that reported having more half of their loans tied up in commercial real-estate, ranging from apartments to office buildings to warehouses.
Gulp.
Fortunately for the bulls out there, CNBC managed to find some âvultures going into this very distressed area and finding opportunitiesâ. Click on the image below for a video featuring Barry Sternlicht, chairman and CEO of Starwood Capital on opportunities in commercial real estate:
Screenshot of Barry Sternlicht, chairman and CEO of Starwood Capital on CNBC :
http://www.cnbc.com/id/15840232?video=1286073669&play=1
Source :
http://ftalphaville.ft.com/blog/200...enough-about-commercial-real-estate-fed-says/
Maybe the FED should contact Goldman and ask for a "sober " risk solution ?