Posted by: Janielle Viggiano
U.S. banks "are slow" to absorb losses on commercial real-estate loans, according to a Federal Reserve analyst. That's stoking fears that banks will face a crisis similar to the one fueled by the collapse of the residential housing market.
According to a Wall Street Journal report ($) Wednesday, a Fed real-estate expert told banking regulators last month that "banks will be slow to recognize the severity of the loss - just as they were in residential."
Commercial property values are down along with rental payments, pummeling lenders. But instead of taking hits on bad loans immediately, many banks are "extending loans when they come due even if they wouldn't make those loans now," the Journal states.