Year Over Year Cumulative Bank Failures

Credit Suisse CMBS Over & Out...Again

If you're holding your breath waiting on the return of the commercial mortgage backed securities market for financing, you must be turning purple by now...Credit Suisse is shutting down it's commercial mortgage lending operations...again.

Before the recession, Credit Suisse was a major CMBS player. As the market boomed, it made billions in loans each quarter that were in turn sold off to investors, making millions for the bank in fees. When the bubble burst in 2008, it disbanded most of its commercial mortgage securities operation.

Last year, with delusions that the real-estate market was rebounding, Credit Suisse decided it wanted to get back into the business and put together a new team, hiring people from Deutsche Bank and GE Capital.

Now, after making an estimated $1 billion in loans, none of which has been securitized, Credit Suisse is again shutting down its CMBS division. The securitization team has been told not to make any new loans, spend firm money, or travel to meet with clients.

Earlier this year, analysts were predicting that banks would securitize $35 billion to $40 billion in commercial mortgages this year, more than double last year's volume. But the market evaporated in the summer as investors accelerated their flight from riskier assets.

To attract enough investors, new issues had to provide sizable yields and protections from losses. At the same time, banks have curtailed their origination of new mortgages because they don't want to stockpile loans on their balance sheets at a time of so much market turmoil and regulatory uncertainty.

Participants in the market for commercial mortgage securitized predict that other operations will also shut their doors this year. This would have broad repercussions throughout the broader commercial property industry which has come to rely heavily on the market for loans.

Source: WSJ

Too Big To Fail

This infographic from Case Research illustrates the concentration of risk in the big banks starting in the mid-1990's.