What has been lost in the housing talk recovery is the grim statistics that commercial real estate has fallen 37 percent in value in the last year. This wouldn’t be such a big problem aside from the tiny detail that some $3 trillion in commercial real estate loans are still outstanding. The commercial real estate debacle is already happening with defaults reaching 16 year highs. This is already occurring before many of the commercial real estate loans reach their refinance dates. In some instances banks are simply ignoring non-payment and giving borrowers a few more months or even years. Why? Because they can still claim the note is current and claim the asset at inflated values.
Yet this is a game we are all familiar with. Suspending mark to market has always been a method for the U.S. Treasury and Federal Reserve to skirt any real accounting from Wall Street. If we look at the current FDIC insured bank balance sheet, we can see that many more problems lie ahead for commercial real estate: (more)
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