Banks to survive commercial property defaults - Fed

Roto Reuters ^

[MAD-AS-HELL]

NEW YORK, May 28 (Reuters) - A Federal Reserve economist said on Thursday the recent stress tests of the largest U.S. banks showed they can weather the impending tidal wave of defaults expected in the commercial real estate market.

"I feel comfortable that the size and portion of commercial real estate exposure was taken into account in the stress test," Til Schuermann, vide president, risk management for the Federal Reserve Bank of New York, told a Congressional Oversight Panel hearing in Manhattan.

[MAD-AS-HELL]

this is all assuming these guys know what the hell they are talking about. The bail outs didn't work. These guys talk out of their behinds like Ace Ventura.

[Buckeye McFrog]

UAW will own all the malls now too, I guess...

[oldpass]

Commercial property defaults are a sign that businesses are
closing up. For each 100 sf of commercial property you are looking at 2-3 jobs gone.

When is the focus going to be Jobs????
Commercial property will only come back when jobs come back.
Auto industry will only come back when jobs come back.
Housing will only come back when jobs come back.
Banking/Finance will only come back when jobs come back.

Mr. Obama where are the jobs you promised?

[unixfox]

Mr. Obama where are the jobs you promised?

Those would be government jobs. You know, like census takers.

[HamiltonJay]

They estimate a 2-3% default, and wind up with a 7-10% default, trust me they won’t survive. It boils down to whether their ‘estimates’ are anywhere near reality, and as we saw.. these so called smarted folks in finance grossly misestimated the residential real estate troubles, there is absolutely no reason to believe they will be more accurate with their commercial estimates.

[BP2]

>>> the largest U.S. banks showed they can weather the impending tidal wave of defaults expected in the commercial real estate market.

Well of course they can.

The large U.S. Banks will absorb the smaller banks that go default. Fewer choices are good for the consumer, right?

Besides, the US Govt is footing the bill — it’s not like it’s hurting the “little guy”.

Oh, wait a minute... it’s the taxpayer that foots the bill.

[HamiltonJay]

No, the comming commercial real estate defaults are coming for the same reasons that the residential bust happened, too much hyperspeculation and run ups in values, everyone wanted in, got easy money to do it, overbuilt, didn’t matter who occupied the property just having the proprty itself was the action that made you rich... Well, Bust has happened, property values plummet, fewer buyers and tenants, overbuilt, overvalued and now unlike a persons home, no incentive to even TRY to hold onto a piece of commercial property. Let the bank have it.

Commercial real estate was overbuilt, overvalued, bubbled just as much if not more than residential and will suffer the same results. Jobs not only have to come back, but the economy has to grow at least another 10-20% from its peak to fill all the space, because everyone was building based on 20% growth projections.

[L,TOWM]

We are not even close to through with the residential losses, yet. What few people realize is that the bailouts so far accounted for investment and derivative write downs. With 12% of RE mortgages delinquent or in foreclosure, this will be Round 2 and then be followed closely by the Commercial defaults.

[Oatka]

We are not even close to through with the residential losses, yet.

Spot On. Look what is coming down the pike (sorry for the HUGE size - gotta shrink it):

[HamiltonJay]

Yep,

I remember for years telling folks the size of this thing would be measured in TRILLIONS, it was going to make the S&L look like nothing and folks laughed at me. There is a hell of a lot more Residential coming, and commercial hasn’t even begun to hit hard. Anyone thinks we are ANYWHERE near to being done with this mess is fooling themselves.

Not to mention the policies and actions of the Fed and Government are going to just drag out and enlarge the problem. Refusing to let them fail, is going to cost us all dearly. Yes if they failed the mess would be big, but the pain would be quick as new players and existing players who didn’t make the mistakes picked up the pieces and arose stronger.. instead we subsidized the fools who made the mess keeping them around and assuring the mess will not get cleaned up quickly, and mostly like never.