POTENTIAL IMPLICATIONS OF INCREASE IN COMMERCIAL REAL ESTATE LOANS

In the November issue of Hoosier Banker, author Jean Wojtowicz provides nice insight into the utilization of alternative loan products in her article “Yellow Flags on Commercial Real Estate.”  (hoosier_banker_article.pdf).  Of particular significance to this blog is Ms. Wojtowicz’s mention of Susan Schmidt Bies’ recent testimony before a Congressional Subcommittee.  Ms. Bies, of the Federal Reserve, stated that between 1992 and 2005 commercial real estate concentrations of the nation’s largest banks almost doubled.  According to Bies, commercial real estate is a volatile sector of the economy, and a downturn could trigger financial stress like that seen in the late ’80’s/early ’90’s (which, in turn, would trigger more commercial foreclosure cases).