Editor’s Note: Last night on Jim Lehrer’s News Hour, they had a special on commercial real estate in New York City. It was quite a bleak picture. The commercial broker they walked around to various commercial develops said that many buildings are over 50% vacant. He went on to show a building that was financed in 2007 with only 1% down at the value of $1.7 billion dollars.
Today the same building is on the market for $600 million, he went on to say that buildings that are unoccupied are taking serious valuation hits because the lack of companies looking to sign commercial leases. In this article, is states that banks are not realizing losses on their books, in my opinion this is because they are hoping for a recovery that is most likely no happening at this point with all this bad debt still in the system. How could we possible have a recovery in the commercial market when people are calling our recovery “jobless”?
Reuters, Washington D.C. – The Federal Reserve told bank examiners last month that banks were slow to take losses on their commercial real estate loans that have suffered as property values sink.
The Wall Street Journal initially reported the Fed’s concern and Fed sources on Wednesday confirmed a presentation was made on the topic to regulators but described it as a training exercise for examiners about potential real estate issues.
The Journal report said the presentation was made on September 29 by Fed analyst K.C. Conway, a senior real estate analyst at the Atlanta regional Fed bank.
It suggested that regulators were preparing for a rerun of housing-related losses that plagued many banks after the residential property bubble burst, the newspaper said.
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