Lawmakers and regulators are desperately hoping that a strong economic rebound will stimulate job growth, consumption and demand for the commercial real estate that banks continue to hold.
But let’s be real: There isn’t enough time on any clock to ever win that race.
Why do I say that? Because, in order for the United States to rebound to a full-employment rate of at least 5%, the nation’s economy would have to create 200,000 jobs per month – for seven years.
Although all the big banks hold significant amounts of underperforming-commercial-real-estate loans, this exposure as a percentage of total-balance-sheet assets averages only 10% to 20%.
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“Although all the big banks hold significant amounts of underperforming-commercial-real-estate loans, this exposure as a percentage of total-balance-sheet assets averages only 10% to 20%.”
This may sound little, but considering the razor-thin equity position of many banks (usually far below 10% of total balance sheet) this will cause headaches for years to come…