Fed economist says banks yet to fully realize commercial losses

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U.S. banks are slow to absorb losses from commercial real estate loans, according to a report from the Federal Reserve. The report indicates that Federal Reserve officials may soon begin preparing for another real estate collapse, this time in the commercial sector. K.C. Conway, a senior real estate analyst at the Federal Reserve Bank of Atlanta, said in the report that banks are slow to absorb commercial real estate losses because of their so-called “capital preservation” concerns. Especially troublesome, according to the report, are the interest-only loans, which require buyers to repay interest but no principal.

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