Newspaper article THE JOURNAL RECORD

Real Estate Problems Spread throughout U.S

Newspaper article THE JOURNAL RECORD

Real Estate Problems Spread throughout U.S

Article excerpt

WASHINGTON (AP) - Weak commercial real estate markets have spread from the Northeast and Southwest to the Midwest and even the booming West Coast, a Federal Reserve Board member said Thursday.

Real estate problems have been most pronounced in New England, John P. LaWare told the U.S. House of Representatives Banking Committee, but weakness now exists along much of the East Coast.

``Market conditions in some Midwestern cities have also begun to show a marked loss of strength, and even the western states of California, Oregon and Washington, long the beneficiaries of strong real estate markets, have begun to report increased office vacancy rates in at least some areas,'' he said.

As a result, the number of delinquent real estate loans at commercial banks are mounting, up 37 percent in 1989 and 8 percent to $32 billion in the first three months of 1990, he said.

However, LaWare and Comptroller of the Currency Robert L. Clarke, whose office oversees nationally chartered banks, said regulators were on top of the trend and insisting on sound lending standards.

The comptroller's office ``has been sounding the alarm on real estate lending for the past three years,'' Clarke said.

Members of the committee reacted skeptically, likening the deterioration in bank profits and the regulators' reactions to the early phases of the savings and loan mess.

``During the '60s, '70s and '80s, the regulators said pretty much what you're saying today,'' said Rep. Henry B. Gonzalez, D-Texas, chairman of the panel.

``I'm worried,'' said Rep. Charles Schumer, D-N.Y. ``Some of the very same fundamentals that caused problems in the S&L industry are going to continue to cause problems in the banking industry until we examine it and change the way . …

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