"Our Children and Grandchildren are not merely statistics towards which we can be indifferent" JFK

Saturday, January 23, 2010

Bank Failure Friday and Bair versus Cramer on CRE

The FDIC shut down 5 more banks Friday bringing the 2010 failures to nine. The FDIC estimates the total hit to their Deposit Insurance Fund at $531.7 million.

FDIC Chairperson Sheila Bair spoke before the Commercial Mortgage Securities Association conference this past Wednesday and stated that troubles in the commercial real estate sector will increasingly be a driver of bank failures this year. She also noted that even income-producing properties have seen a decline in credit performance.

Sheila stressed to the conference attendees that “losses need to be recognized”. She said banks should try to modify troubled commercial real estate (CRE) loans, but must recognize losses if such a workout does not maximize value.

"Of course, the ultimate scale of losses in CRE loan portfolios depends on the pace of recovery in the U.S. economy and financial markets," Bair said. "On this point we remain hopeful."

Bair versus Cramer regarding CRE outlook
Jim Cramer’s Blog 12/29/09:
The biggest canard for 2010 will be the “collapse in commercial real estate”. “There will be no collapse. In fact we will look back at 2009 and recognize it as the year the industry consolidated and the strong got stronger and will be ready to pick off any properties of the weak”.

Cramer is a self proclaimed expert on commercial real estate because?????

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