U.S. Commercial Property Crisis Let Banks Die

March 10, 2010 - PRLog -- Baech (Switzerland)  – After the strong capital gains of the last days the beginning of the trading week was calmly for U.S. indices. Obviously, the market participants do not completely evaluate the threatening news from the banking sector yet. However, this could change soon as the outcome of the past commercial property boom may hit U.S. economy hard.  

Investment24 already reported about the problems in the U.S. commercial property market at the beginning of February, now there is growing evidence on the range of the new U.S. real estate crisis. A report of the Congressional Oversight Panel (COP), a court of inquiry for the use of the economic stimulus packages, reveals serious problems: There are 3.4 trillions USD of financing credits within the commercial property market; 1.4 trillions USD of this sum will become due between 2010 and 2014. “Apart from these astronomical figures it is alarming that for almost half of the mortgages property’s value does not even cover the credit anymore,” comments Bernd M. Otto of Investment24 Research. “The highest losses are expected for 2011, the multitude of non-fundable credits will again hit the banking sector hard.”  

This process is already underway as the Federal Deposit Insurance Corporation (FDIC) closed four banks on last Friday (March 5). Therewith, the number of failed banks has increased to 26, just for 2010. For comparison: during the whole crisis year 2008 “only” 25 banks were closed by FDIC. “About 45 percent of the liabilities in the commercial property sector are owned by banks, especially smaller regional banks are involved here,” explains Bernd M. Otto, CEO of Investment24 AG.            

If this negative trend is going to continue there will be a latent risk for the economic condition of the U.S. as regional banks also serve as creditor for small and medium sized companies. A growing credit crunch could have consequences for the still weak economic recovery of the United States. Bernd M. Otto: „Additionally, the liabilities of the commercial property sector have been converted into several derivatives, which in turn are spread over many investors. It is assumed that resolving the outcome will be an enduring and complicated process.”        


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Investment24 AG, based in Switzerland, provides quality information about interesting opportunities on world stock markets. The company not only demonstrates a positive performance in excess of 350 percent since July 2007, but it also offers a high degree of transparency. This is in sharp contrast to other stock market or financial services newsletters. All transactions are explained in detail, and are provided with background information. These results are achieved with professional risk and money management. CEO and editor of the stock market letter is Bernd M. Otto, supported by experienced staff.
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