The Congressional Oversight Panel for the TARP program released information on its findings on the health of small banks. Almost 3000 small banks (there are about 8100 banks in the USA) will have to dramatically reduce the business they do with commercial real estate and build up their balance sheet. Small banks are facing a “tidal wave” of losses from commercial real estate loans in 2010 to 2014 says Elizabeth Warren – the chairperson of the panel.

Approx $1.4T in commercial real estate loans are coming due in the next 4 years, and in almost half the cases the value on the loan is higher than the current property value. Small banks own close to half of those loans. The rest is owned in mortgage backed bonds (and mortgage backed bond funds).

Many of these small banks will quietly fail and be taken over by larger banks at fire sale prices in shotgun weddings overseen by the FDIC.