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Remember the havoc in the financial markets when the residential bubble burst last year? Are we in for a rerun this year or next year?
You are probably thinking that such an event could not occur. Well think again. There is a report that says that we may be in for another crisis.
The report was initiated by Federal Reserve analyst, K.C. Conway. Conway is a senior real estate analyst at the Federal Reserve Bank of Atlanta. The Federal Reserve has acknowledged the report but said that it is not part of its formal opinion. What does the report say?
The report states that banks have not been taking their losses on commercial real estate loans. Conway's report predicted that commercial real estate losses would reach roughly 45% next year.
Most of the toxic assets are from interest-only loans. These loans have no benefit from amortization. Banks are also preserving capital, which is another reason for not taking their losses.
One thing is for sure. The bubble has burst and its only a matter of time before all of these losses come crashing down, much like the avalanche that we had last year.
Is there another bank bailout coming?
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Reader Comments (Page 1 of 1)
10-10-2009 @ 8:41AM
Richard Ballard said...
IMO there is a petroleum-related aspect to the collapse of US commercial real estate prices. The petroleum-producing Gulf states historically reinvested their profits in the United States, often in US commercial real estate. IMO during the 2008 petroleum price bubble the Gulf states committed to expensive domestic infrastructure development; IMO when the 2008 petroleum price bubble collapsed they withdrew (partially?) from the US commercial real estate market while continuing their own domestic development commitments. IMO the resulting reduced liquidity and reduced demand for US commercial real estate depressed prices (created toxic assets) with no relief in sight. Richard Ballard http://www.myspace.com/rjballard