New FDIC rules on real estate write-offs are very liberal -- for banks
Filed under: Economy
The FDIC released new guidelines to bank examiners on Oct. 30, and they present a more "liberal" view of what is and is not a nonperforming commercial real estate loan. In theory, the regulations could reduce the number of bank write-offs.
The guidelines say that "while CRE [commercial real estate] borrowers may experience deterioration in their financial condition, many continue to be creditworthy customers who have the willingness and capacity to repay their debts. In such cases, financial institutions and borrowers may find it mutually beneficial to work constructively together."
The Wall Street Journal writes that a study by Foresight Analytics finds that "About $770 billion of the $1.4 trillion commercial mortgages that will mature in the next five years are currently underwater."
The change in how the current regulations should be interpreted appears to be a fudging of the way in which federal agencies look at bank financial statements. Loans that are "nonperforming" may be restructured, but many are likely to lose a great deal of their value in the process. The FDIC appears simply to be dealing with losses that would be incurred in the normal course of business by pushing the true accounting for them into the future.
It is to the political benefit of Washington to make it appear that the banking sector is getting better. It also probably helps the FDIC, which is essentially insolvent, from having to come up with billions of dollars to insure deposits at failing banks.
In the meantime, the next wave of real trouble in the financial industry is being partially swept under the rug.
Douglas A. McIntyre is an editor at 24/7 Wall St.
D-Day for Harry Reid: Can he wrangle 60 votes for Senate health reform bill?
Fed stalls on Chinese bank deal, costs taxpayers $1.7 billion
Dell in a handbasket: Should founder Michael Dell resign?
Reader Comments (Page 1 of 1)
10-31-2009 @ 2:48PM
FOXYLYNX said...
WILL THE "TRANSPARENT" OBAMA PLEASE STAND UP - WE ARE ALL WAITING WITH BAITED BREATH!!! YOU PEOPLE THAT VOTED FOR THE HISTORICAL PREZ ARE FINDING OUT HE IS JUST LIKE ALL THE REST, EXCEPT HIS PROMISES FAR OUT WEIGHT HIS INTENTIONS.
Reply
10-31-2009 @ 7:25PM
dev said...
Let's overlook and bailout the handful of Trillion dollar mistakes and focus on the 20 million 100K mistakes....feel suddenly overwhelmed and give up regulating altogether! Great Strategy!
Yup if you carry a sign saying "I'm too big and stupid." The U.S government will NOT let you fail! You may continue big, stupid "mistakes" and we will tax the great-grandchildren of our American Peons if necessary to indulge you! Ofcourse if you could take up a 1980s cocaine habit or set your marijuana farms on fire it would be cheaper! Whatever you decide...because you are Patrrrrriots, Maverrrrrrrricks, degreed, pedigreed, well-greeded, and certifiably smart schmucks! How many years of education at an Ivy League do you need before feeling qualified to buy Wooden Nickels..errrr Credit Default Swaps, CDOs and other stuff you pretend to understand.....with somebody else's money...with your mistakes paid for by somebody else's kid's future? If you get kicked try selling off the pain in your nuts, the howl, the video rights, and the right to copyright the howl.
Reply
10-31-2009 @ 7:50PM
dev said...
Big screw-ups deserve Big Bonuses! Whew that was hard work, and deserves a Burger Yacht with cheese on it!
Entitlements, levy a revenue over American Peons so we can have an American version of inbred Royalty.
Meritocracy? Those are like teaser rates to get dishwashers to jump the southern border! duh! They're just lining up at the borders to discover an affordable cure for cancer in America!
Charge a family of 4 making $88,000/yr, 12K/yr for the rights to live...and if they lose their jobs charge them 2.5% of whatever they have left. If they pay 20K/yr in mortgage payments to live in a million dollar closet pretty soon it adds up to real money. If they work for Hooters, make them pay $20 for uniforms and kitchen staff wage supplements...every penny counts in this class warfare! How dare the peons complain! They want food! Look how poor people are fat and rich people can never be too thin or too rich! Leona Helmsley would never tie her own shoelaces, put down her copy of Atlas Shrugged and stand up quietly!
Reply