Flagging growing concerns on Capitol Hill that commercial real estate losses could threaten economic recovery, a bipartisan group of 79 House lawmakers sent a letter Monday to federal regulators asking them to strengthen efforts to address the situation.
The letter, which was sent to Treasury Secretary Tim Geithner and Federal Reserve Board Chairman Ben Bernanke, urged regulators to take three main steps: establish a clear method for measuring and evaluating the effectiveness of recent commercial real estate loan modification guidance; institute ways to more clearly differentiate performing versus nonperforming loans; and encourage lenders to continue to make credit available for worthy borrowers to restore confidence and long-term value in the market.
"The financial crisis continues to have a dampening effect throughout the credit markets. … The scarcity of credit in the $6.7 trillion CRE sector poses a dangerous threat to our financial system just as our economy has begun to show signs of recovery," the lawmakers, led by Reps. Paul Kanjorski, the chairman of the House Financial Services Committee's capital markets subcommittee, and California Republican Ken Calvert, said in the letter.
"We strongly believe that regulators must take continued steps to mitigate ongoing turmoil in the CRE sector before it becomes a full-fledged crisis, forestalls our economic recovery, and possibly requires additional taxpayer-funded capital injections," the letter said.