The President of the Boston Fed, Eric Rosengren, has in effect said that small and regional banks are at risk in the next wave of writedowns for U.S. financial institutions. He sites construction loan exposure in particular as a place to worry. I give the story of small and regional exposure to construction loans six months before it hits the fron t page.
“To date, the financial market turmoil has impacted mostly large international banks, but smaller financial institutions may yet get dragged into the tumult, said Eric Rosengren, the president of the Boston Fed on Friday. A weak housing market has turned into one with “major declines” and have begun to impact some financial institutions that had taken outsized positions in construction loans or focused on other types of consumer debt, he said. Research into the collapse of housing prices in New England in the 1990s shows that foreclosure issues can last much longer than most economists assume, Rosengren said. Riskier loans in general have made delinquencies in this downturn about the same as the 1990s even though economic conditions are not as bad this year, he said. Should the economy worsen, the housing problem could become much more severe, he said.”
–MarketWatch, 30 May 2008
See: Credit Crisis Timeline for a full list of writedowns and capital raising by institution and a timeline of the credit crunch.
See also: Other posts under the label ‘regional banks.’