CRE Trouble Justifies Pessimism

Yesterday a friend of mine asked me why I'm so pessimistic on the economy.  Part of the explanation is that I'm not amenable to the positive spin that mass media reports put on most economic news.  It's an election year, and most journalists (including financial journalists) are in the camp of the incumbent party. 

Furhtermore, I can't help but notice items like this one on the dangers posed by delinquent commercial mortgages:

According to a report from the analytics firm Trepp, spiking delinquencies in CMBS could cause bank failures to increase as much as 30% in 2010. The delinquency rate for loans in commercial mortgage-backed securities (CMBS) spiked to 7.61% in March from 6.72% in February, according to the report.

Private analysts aren't the only ones with concerns about the banking system's stability:

By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.

The TARP's chief overseer has admitted that none of the banking system's problems have been solved.  The U.S. banking system is still insolvent, and any seemingly minor hiccup can push us right back into crisis.  Now you know why I'm still a pessimist on the economy.