I don't know if anyone saw this, but its extremely unnerving for the banks I am sure.
http://www.federalreserve.gov/newsevents/press/bcreg/20091030a.htm
This is the FRB telling the banks you are on your own when it comes to CRE. That the FED is encouraging active loan workouts as an official policy. Also Banks with significant CRE exposure are on their own. It seems to me that the FED is now acknowledging the major CRE problems. The biggest risk here are the banks who have not used the rally to offload exposure.
"Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers' financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined."
The Fed created QE for residential real estate, they have gotten hammered for it. They do not want the backlash of QE for CRE. Another reason why the markets got blitzed Friday.
I would not be surprised to see some CRE related downgrades in the financial sector Monday Morning. The same analysts who though the banks can go back to business as usual will do a complete turn around.
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