The Next Crisis

TARP Panel: Small Banks Are Facing Loan Woe:

Nearly 3,000 small U.S. banks could be forced to dramatically curtail their lending because of losses on commercial real-estate loans, a congressional inquiry concluded.


The findings, set to be released Thursday by the Congressional Oversight Panel as part of its scrutiny of the Troubled Asset Relief Program, point to yet another obstacle for the slow-moving economic recovery. The small banks being threatened by loans they made for shopping centers, offices, hotels and apartments represent a major cog in the U.S. credit system, especially to entrepreneurs.

"The banks that are on the front lines of small-business lending are about to get hit by a tidal wave of commercial-loan failures," said Elizabeth Warren, a law professor at Harvard University who heads the TARP oversight panel.

Someone might want to live in a house, but who needs an empty strip mall?