Small U.S. Banks Could Be Forced To Curtail Their Lending
February 11, 2010 7:30 AM
According to a report by the Wall Street Journal, nearly 3,000 small U.S. banks could be forced to dramatically curtail their lending because of losses on commercial real-estate loans, a congressional inquiry concluded.
Elizabeth Warren, a law professor at Harvard University who heads the TARP oversight panel, said, “The banks that are on the front lines of small-business lending are about to get hit by a tidal wave of commercial-loan failures.”
According to the report, some 2,988 small banks out of 8,100 have problematic exposure to commercial real-estate loans, which means that their level of commercial real-estate loans is at least 300% of total capital or their construction and land loans exceed 100% of total capital.
The panel also said that between 2010, and 2014, some $1.4 trillion in commercial real-estate loans is coming due, and for nearly half of those loans, the borrower's debt is more than the property value.
