Wednesday, September 16, 2009

Report: Fed Reviews Banks CRE Exposure

by Calculated Risk on 9/16/2009 02:41:00 PM

Better late than never ...

From Steve Liesman at CNBC: Fed Reviewing Banks' Commercial Real Estate Exposure (ht Bill)

The Federal Reserve is involved a broad review of commercial real estate exposures at the nation's largest regional banks, which Fed sources say is both the result of concern in that area but part of the "new normal" for how they will be supervising banks.
...
People familiar with the examinations say the fed is "getting granular" looking, for example, at the differences in banks' concentration of construction loans vs. multifamily vs. motels and retail.
Clearly the Fed has room for improvement. A review of bank failures (see: Federal Reserve Oversight and the Failure of Riverside Bank of the Gulf Coast) shows that the Fed recognized problems of excessive concentration and risk taking as early as 2003 - and the Fed did nothing.

I think the Fed needs to explain how the new approach would have caught the problems at Riverside (as an example) in 2004 or so. Hopefully that is the point of this "new normal".