Don't strangle banks' real estate lending FINAL Edition
Just as with any kind of lending, real estate loans can cause serious losses for banks whose managements have made mistakes. Some bank managements did make mistakes in real estate, and a few banks have failed as a result. But it is a big jump from recognizing that real estate lending can be a proble...
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| Published in | USA today (Arlington, Va.) |
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| Main Author | |
| Format | Newspaper Article |
| Language | English |
| Published |
McLean, Va
USA Today, a division of Gannett Satellite Information Network, Inc
29.05.1991
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| Online Access | Get full text |
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| Summary: | Just as with any kind of lending, real estate loans can cause serious losses for banks whose managements have made mistakes. Some bank managements did make mistakes in real estate, and a few banks have failed as a result. But it is a big jump from recognizing that real estate lending can be a problem to argue that the risk justifies a general legal prohibition. There are more effective ways of maintaining safety and soundness in the banking system. First, a new system of regulation has been evolving that moves away from rigid legal guidelines. In recent years, bank regulators have been moving toward a flexible regulatory system that permits banks to take on varying degrees of risk so long as they maintain capital levels consistent with the risks. Third, both Congress and the banking industry are insisting that imprudent lending be curtailed sooner and problem banks merged before they fail at a cost to the FDIC. Such aggressive early intervention by the bank regulators would have prevented the massive real estate losses that the FDIC's Bank Insurance Fund is now paying for. |
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| ISSN: | 0734-7456 |