Real-Estate Trouble: It's Deja Vu

It seems that periodically banks get clobbered by the real-estate market. If it isn't one thing, it's another. Sometimes it is due to external forces beyond banks' control. Back in the 1970's, banks' real-estate-loan portfolios consisted of fixed-rate loans, and competition from a new financial product offered by nonbanks -- the money-market fund -- resulted in significant disintermediation. While it is nice that subprime loans are not considered to be predatory, per se, they have caused a lot of pain for bankers and borrowers alike. Federal bank regulators have been offering guidance on real-estate lending for quite some time, issuing interagency guidelines in 1992. Since then, the agencies have released a number of issuances addressing various concerns about real-estate lending.