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Huge Commercial Real-Estate Bust Is Just Around the Corner; Watch Out for More Wall Street Tears for a Rescue

By Ward Harkavy in Bankers, Featured
Thursday, Oct. 8 2009 @ 9:02AM

Now why is it that the banks warn us to start spending again to make them whole, while at the same time they're ignoring the problem of their own debt in a sector that the public doesn't have anything to do with?

The specter of a second meltdown is bad news, and the Wall Street Journal is playing it up, but it's not new news. See last April's "Next economic crisis looms: Commercial real estate defaults," from McClatchy's Kevin G. Hall.

Not to knock the WSJ. This isn't its first story on the topic, obviously, and this morning's account, "Fed Frets About Commercial Real Estate," is meaty and frank:

Banking regulators are girding for a rerun of the housing-related losses now slamming thousands of banks that failed to set aside enough capital during the boom to cushion themselves when the bubble burst.

And banks are carelessly ignoring the problem, which has been building for years. Their rainy-day funds have sharply dwindled, showing they're unprepared for this second phase of the meltdown.

See the WSJ's account of the commercial real-estate sector's "most toxic loans."