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It's been almost a decade since the U.S. banking industry, heavily invested in speculative real estate and other risky markets, came crashing to its senses, triggering the biggest government bailout in history.
But, notes Richard Merzbacher, president of the Jericho-based State Bank of Long Island, "Bankers don't always learn from history."
While no one sees a full return to the smoke-and-mirrors loan activity that made the FDIC the largest land owner in America, some banking officials and government regulators are now sending up the caution flag.
Among them: the FDIC itself, which publishes a biannual report on risk in underwriting practices at federally supervised banks.
Of the 612 banks examined that were active in commercial real estate, 15 percent made short-term commercial real estate loans with minimal amortization and large balloon payments--"frequently enough to warrant notice," the agency's most recent report said. Another 5 percent were characterized as making these loans commonly, or as standard procedure.
Of the 1,212 banks examined, 28 of which were in New York, slightly more than 6 percent have loosened their standards in an effort to achieve loan growth goals.
Maintaining a profitable loan portfolio is a growing problem on Long Island, where the hot economy has attracted real estate lenders from...