Just when we thought it was safe to go back in the water. Get ready for more big losses from the United States banks. The big worry for the US economy is the tanking commercial real estate market, and that will damage the banks.
Earlier this month, Congressional Economic Committee chairwoman Carolyn Maloney told reporters the $3.5 trillion commercial real estate market was a "ticking time bomb" which could result in another wave of losses at US banks. The banks have already lost billions in residential mortgages and business loans but the collapse of the commercial property market would devastate them and prolong the recession.
Federal Reserve's Associate Director of Banking Supervision and Regulation Jon Greenlee says: "At the end of the first quarter, about seven percent of commercial real estate loans on banks' books were considered delinquent. This was almost double from the level a year earlier."
Add to that a report showing that Moody's REAL Commercial Property Price Indices has found that commercial real estate values around the United States have dropped 35 percent from their peak in October 2007.
US banks are in for another hammering.
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