Notices by Artemesia (artemesia@techhub.social), page 2

@freemo @evacide

> if landlords arent making the most of their property by leaving it empty, then why would banks want to avoid the chance of profit as well.

The banks' problem is that as long as the landlord maintains the fiction that the property can be leased out at $50/foot, the banks can carry the loan on the books at full value even if the property has sat unleased for years, so long as the landlord continues to make payments on time. But the moment the landlord leases it at a more realistic price (say $25/foot), that creates a mark to market event where the bank has to reduce the book value of the loan, and revalueing loans lower tends to interfere with one's annual bonus. So you see banks have a powerful incentive to maintain the fiction that it will lease at $50/foot *someday*, even though a property pulling in at least *some* income is arguably the more valuable loan. 1/2

@freemo @evacide

If the bank employee takes an action that forces the bank to book a loss this year, on a loan where the book loss could have been postponed 10 or 15 years, the bank's management and colleagues' reaction is going to be: "you asshole". Add to that banks being highly leveraged (they carry only 2-7% reserves, depending on their line of business and quality of their portfolio), just one loan going declarably bad can trigger a lot of regulatory scrutiny and possible close examination of their remaining loans carried at book value. (see prior comment about bank runs)

@freemo @evacide I am talking about the content of the Business Insider article, which is clearly referencing instances of US banks in US cities refusing to permit lease rates below what's in the loan covenant. You may wish to (re)read the article.

My own comments delve into just why bankers make these seemingly counterintuitive choices.

@freemo @evacide The world of commercial real estate financing is not required to be constrained to your own personal experience.

@freemo @evacide

> No it isnt, but

What isn't isn't?