Is your bank healthy?

What is the truth about the health of the banking industry and your local bank? As a personal witness to the S&L meltdown in the late 1980's, I got a first hand look at what financial panic will do to a bank. However, most of my friends, folks in the real estate business and related industries never knew just how bad. Sure business was down but it happens. This one is different. Very different and BIG.

It's important to have a good understanding of the current market to properly plan for the future. The Federal Reserve Bank along with the FDIC are all sugar coating the health of the banking industry. But they have no other choice. It should be a "don't ask, don't tell" factor. The Feds are backing almost every American financial market at this point to ensure the economy has some chance of getting on its feet.

Call your local banker and have lunch with them. The majority of my banking friends can't tell you the truth but the lunch should be interesting. Most of the banks are hearing the Feds loud and clear. Don't make another bad loan......period until we say so.

Bottom line is this. The financial market hasn't hit rock bottom yet as many of the ALT A and HELOC's on the books haven't come home to roost yet (with all due respect to Chicken Little). But the rating agencies will be bringing them home sooner rather than later. What it means to us in commercial real estate is a continued tightening of lending standards and hope we don't get "sick" simply by being in the same house. CAP rates will continue to fall and entire property types as well as states completely red inked by the national markets so plan accordingly.