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alstry (< 20)

Are MOST Banks Insolvent???



April 20, 2009 – Comments (7)

We know that a significant percentage of loans banks make are to commercial real estate deals.

Now we know that commercial real estate prices are crashing around America.  400 of the largest 2000 shopping malls have shut down.  The John Hancock building in Boston which sold for over $1.2 Billion a few years ago is now going for about half that amount.  In many cases, owners would be lucky of their buildings were worth 50 cents on the dollar.  And we know many of these buildings are highly leveraged as bankers were scrambling to lend money against them over the past five years.

Here is a story from Minneapolis:

Twin Cities real estate investor Ned Abdul is the new owner of Northland Corporate Center, a long-vacant Brooklyn Park office property that was taken back by lenders last year.

Abdul declined to comment on the price. Local real estate sources said it was about $1.3 million, far below the 200,400-square-foot building's most recent value for tax purposes of $8.7 million, according to Hennepin County property records.


Many banks have well over 100% of their capital out to commercial real estate loans.  What do you think the financial condition of these banks are if they were properly accounting for these loans????  Do you think the banks are taking appropriate losses???

7 Comments – Post Your Own

#1) On April 20, 2009 at 1:48 PM, alstry (< 20) wrote:

From the WSJ: 

Lending at the biggest U.S. banks has fallen more sharply than realized, despite government efforts to pump billions of dollars into the financial sector.

No kidding.....Who are banks going to lend to?????

Commercial Real Estate???  Housing Developments????  Over Leveraged Consumers????

Those that are qualified to borrow have no need to borrow......

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#2) On April 20, 2009 at 2:03 PM, alstry (< 20) wrote:

Vacancy in Los Angeles County reached 14.3% in the first quarter, up from 11.2% a year earlier, according to a report released last week by Cushman & Wakefield. In Orange County, where demand has been dwindling for more than a year, vacancy ticked up to nearly 18% from 15%.

Among the hardest-hit markets are the Inland Empire, Irvine and north Los Angeles County, all of which have been wracked by the losses of tenants in the troubled industries of mortgage and finance. Vacancies in all three areas have surpassed 20%, a sign of a very weak market. In Ontario and the area around Los Angeles International Airport, vacancy tops 30%.

From CalRisk

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#3) On April 20, 2009 at 2:19 PM, MikeMark (29.08) wrote:

Depends upon how you look at it.

If you look at it from the current Fed and banking rules perspective, I think the answer is no.

If you look at it from the point of view of complete ability to return all demand deposits, I think the answer is yes.

If you look at it from the point of view of complete 100% reserve banking (no fraud), they've all been insolvent since 1908 or so.

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#4) On April 20, 2009 at 2:23 PM, Mary953 (85.27) wrote:

Alstry, go laugh all the way to the banks.  It looks like your  answer may be yes.  And I have been too busy to sign on and watch.

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#5) On April 20, 2009 at 2:26 PM, FinancialModeler (25.13) wrote:

No, they are not insolvent. Something called TARP.

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#6) On April 20, 2009 at 3:20 PM, Rehydrogenated (33.27) wrote:

Lol, yeah pretty dumb question... Of course they are, that like 99% of the fun!

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#7) On April 20, 2009 at 8:39 PM, whereaminow (< 20) wrote:

Damn! Reydrogenated beat me to it. 

Fractional reserve banking = legalized embezzlement for over three hundred years. (warning: pdf)

David in Qatar


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