OpinionIndustry News

Banks in real estate development carries heavy risk

Perspective: Savings and Loan crisis provides history lesson

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Commercial real estate development is neither an appropriate nor a necessary business activity for the nation's banking institutions. Yet federal regulators have allowed two major banks to invest in such projects, despite the considerable inherent risks and the troubling historical precedent of the savings-and-loan crisis, in which hundreds of financial institutions failed largely as a result of unwise real estate developments. These regulators should be compelled to reverse their erroneous decisions and not allow these banks to go forward with these activities. The Office of the Comptroller of the Currency, an arm of the Bush administration that regulates federally chartered banks, has given Bank of America and PNC Financial Services Group permission to invest in two major real estate development projects that they contend are part and parcel of their banking business activities. PNC will invest $122 million in a mixed-use project near its headquarters in Pittsburgh, Pa., that will ...