Over the past decade, banks also increased their exposure to commercial real estate in ways that aren’t usually counted in their tallies. They lent to financial companies that make loans to some of those same landlords, and they bought bonds backed by the same types of properties.Bank makes loans to real estate developers directly.
That indirect lending—along with foreclosed properties, trading portfolios and other assets linked to commercial properties—brings banks’ total exposure to commercial real estate to $3.6 trillion, according to a Wall Street Journal analysis. That’s equivalent to about 20% of their deposits.
Bank also makes loans to companies that makes loans to real estate developers.
Bank ALSO made loans by buying bonds sold by finance companies and real estate developers for those same properties.
Not quite CDO squared, more like CDO*3, but funny.