WASHINGTON – The economy may be “sputtering,” said Rep. Walt Minnick D-Idaho, but he believes his proposal to bolster commercial real estate lending could forestall a crisis that could lead to a double-dip recession.
His bill has gained traction nationally, receiving two hearings from the House Financial Services Committee, of which Minnick is a member. Minnick has been working on the idea for nearly a year, and was a “major force in bringing this issue to our attention,” said the committee chairman, Rep. Barney Frank, D- Mass.
If it works, Minnick said, the measure could stabilize the commercial real estate market and free overextended small banks to lend to small businesses in their communities.
Many of those smaller, independent banks have been flagged by regulators for having too much commercial real estate debt on their books, Minnick said. At least six smaller banks headquartered or doing business in Idaho are under regulatory supervision for having too much of that sort of debt, and they’ve been ordered to get rid of it.
But the market for commercial real estate has dropped 40 percent nationally, meaning that the property often is worth less than the outstanding loans are. As a result, many borrowers have defaulted.