Let's hope Geithner's stress tests took this into consideration along with the credit card defaults and the rapidly increasing housing foreclosure rates. If history is a guide, then all of this was probably negotiated out of the tests because real world problems have consistently been ignored or undervalued during this recession. The next banking meltdown?
Delinquency rates and defaults on office and retail buildings and hotels have more than doubled in just six months. For apartments and industrial buildings, the rates have increased more than 80 percent, according to Reis Inc."Likely underestimated." Shocking. In other words the stress tests were part of yet another big lie. Nobody likes being lied to repeatedly. Especially when the lie involves giving a free ride to the overpaid scam artists from Wall Street. Geithner is obviously never going to change from siding with Wall Street over the American public so the Paulson plan will continue as long as he sticks around.
While homeowners are defaulting at almost four times the rate of commercial landlords, the sudden spike in late payments has many industry insiders worried about the collateral threat to the economy and financial system. Nearly $73 billion worth of commercial real estate loans are in some level of financial distress, according to Real Capital Analytics.
The risk to the economy is unknown, but likely underestimated in the government's stress test of 19 major banks. The results released last week projected that should the recession worsen, the losses from commercial real estate loans could hit $53 billion, or 8.5 percent of their overall loan losses over the next two years.
