An increasingly popular tactic that’s being used by banks to avoid writing off bad loans – and, in turn, taking huge hits on their capital – could be setting the stage for even more dramatic economic woes. The tactic is popularly referred to as “extending and pretending,” and it takes many different forms. Stretching out maturities and extending below-market interest rates are two of the most popular techniques. These strategies allow banks to prevent the default of billions of dollars of loans that were made during the real estate boom; however, they may be drawing out a process that could ultimately trigger their demise. Continue reading “Banks’ Solution to Bad Property Deals? Extending and Pretending” »

It’s one thing to know that there is an elephant in the room, but it’s a totally different situation when no one is willing to vocalize that there is an elephant in the room or talk about the problem that it is causing. This may well be the situation with many banking institutions at present. In spite of the government’s attempts to buy time for the recovery process by promoting their supposed re-gained health and vitality, the stark truth is that business at your local bank may get much worse before it gets better. Continue reading “Just How Many “Troubled” Commercial Properties Is Your Bank Carrying?” »