Allan, are the commercial real estate loans also bundled (Freudian, I initially typed “bungled”) into impenetrable CDS’s, or can the banks cram down the balance in those cases to at least keep the borrowers alive and cash-flowing into the banks’ coffers to some extent?[/quote]
Cricket: That I don’t know. The CRE thing came up in a conversation we were having about various colleagues (in insurance/surety, banking and finance) and their respective takes on the economy.
I can certainly ask, and I would imagine someone like Davelj on this forum would probably have a better handle on that than I.
One interesting thing that did come up relative to CRE was that downtown San Francisco has experienced tremendous turnover in the last five years (something like 75% of the buildings have changed hands through sales) and that many of the new owners are perilously close to default due to lost value and plunging occupancy rates. According to Wells, metro LA and parts of San Diego are facing similar circumstances and the large banks like Citi, Wells and BofA are looking down the barrel in terms of exposure to loss in their respective CRE portfolios. I’ve known the guy in question for over 20+ years, dating back to my time on the corporate side, and I’ve never known him to panic or give over to hyperbole, so when he says that he’s scared, its genuine.
