Banks to survive commercial property defaults - Fed

[Joanne98]

Source: Reuters

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.

Recently federal regulators instituted a stress test of 19 banks to determine the banks' health under extreme economic conditions. The test included two years out but also considered a third year, Schuermann said.

That would include defaults of some of the most aggressive loans to commercial real estate borrowers made during 2004, 2005 and 2006, he added.

Unlike home mortgages, most commercial real estate loan principals don't amortize or amortize little over the life of the loan, which is typically three to 10 years. Instead, borrowers refinance -- they repay the loan with a new loan that is at least as big. If the borrower cannot refinance, default usually follows


Read more: http://www.reuters.com/article/etfNews/idUSN2834138520090528

[msongs]

1. good. cancel all federal taxpayer rip off bailouts nt

[Oregone]

2. "tidal wave of defaults expected in the commercial real estate market"

Huh. Well, I assume this is more "Good" news like the bankruptcy of the auto guys. Everyone seems to be talking about the not too far off recovery already.

[notesdev]

3. The Disingenuous Reserve strikes again

Nice timing on this. The original assertion is questionable; maybe, maybe not, is my assessment.

But it's a pointless topic, and there's nobody at the Federal Reserve who doesn't know it.

The staggering projected deficit + the 34% reported drop in federal income tax receipts + the bond market successfully calling Bernanke's bluff on "quantitative easing" just set off an interest rate hike.

The whole 'save the banks' game they were playing depended on keeping those interest rates down and refinancing as many people as possible into more affordable deals. Now that these geniuses just spiked rates, there is NO plan that can save the banks. None. All the major banks are toast.

Still-open questions are along the lines of: how long until they go under, how much more money will they steal from us through our government in the process, and will so much be committed to this no-win game of trying to save those banks, that they take down the US government with them.

[jwirr]

4. Promises, promises.....

[Zenlitened]

5. "Subprime is contained."

:scared:

[mbperrin]

6. I'm sure they will - when the taxpayers once again save their bonuses!

Really tired of this.....and yes, I was against it from the start.