Thank you for sharing!

Your article was successfully shared with the contacts you provided.

WASHINGTON, DC-Impending problems with commercial mortgages are making their way into the public domain and appear to be catching–finally–the attention of Congress. The latest missive comes from Federal Deposit Insurance Corp. chairperson Sheila Blair, who warned in a television interview that commercial real estate loan problems are about to be on par with the losses banks experienced from sour residential loans.

Atlanta Federal Reserve Bank president Dennis Lockhart also raised an alarm last week in remarks to the Chattanooga Area Chamber of Commerce, noting that “commercial real estate weakness poses a serious potential risk to the economic recovery and to the banking system.” He said that the Fed would have to guard against tightening monetary policy too soon, as a result.

While such news is discouraging for an industry that is already reeling there is one compensation: as they realize that CRE is facing a huge debt deficit, Congress may become more inclined to act. Up until now, Congress and constituents have been battling bailout fatigue. However as the alarm bells are sounded by credible authorities–a Fed bank president as opposed to, say, an industry association representative–the will to pass additional support may be mustered.

“Politically there was only so much Congress could have done at the beginning of the year–there was just too much outrage over TARP,” Peter Cohan, of Peter Cohan and Associates, tells GlobeSt.com. “Also there wasn’t a sense of an immediate crisis with commercial real estate, so it made sense to back-burner that particular problem.”

Now, though, numbers that have been emblazoned in the industry’s consciousness are starting to make their way into the public domain. There is $153 billion worth of CMBS loans coming due in 2012, many of which are secured by properties that have declined significantly in value, Cohan noted. “The industry knows all this, but I think it is starting to sink in with the public and Congress.”

Indeed, this week New Jersey Senator Robert Menendez sent a letter to Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke asking them to take “early and forceful measures” to address the rapid decline of the commercial real estate market.

“The federal government can, and must, craft solutions that help kick-start commercial lending and the market for commercial mortgage-backed securities,” he notes.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.