Some banks woke up early to the risks and are reducing their off-balance-sheet loan commitments as fast as they can.
Charles Calomiris, also warned of an Armageddon for European banks due to their over-weighted loan commitments to the European sovereigns.
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U.S. Bank says construction loans accounted for nearly 50% of its total new loan commitments last year, up from 15% in 2008.
Yet another would raise the capital charge on loan commitments.
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An even bigger threat is a proposed new accounting rule that would require banks to "mark to market" any loan commitments that can be traded in the secondary market.
Looking at Pipeline Risk, which is the ratio of CRE loans to CRE loan commitments, 4, 479 community banks have a Pipeline of 80% or higher, which is 58.5% of all FDIC-insured financial institutions.
The Solyndra case represents less than 2% of total loan commitments made by DOE, and will be easily covered by a capitalization of eight to ten times larger than any ultimate losses expected following the bankruptcy proceedings.
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The magazine went further to suggest that they hope the package will convince the markets that loan commitments will cover the potential bond losses and contain the issue from spreading into Portugal and, perhaps more dangerously, into Spain.
Further, six innovative energy projects have received conditional loan guarantee commitments from the DOE and secured developer financing, but, because the OMB will not consider loan guarantee funding to be obligated until loans have closed, these projects, too, will be cancelled.
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President Obama announced in his weekly radio address Recovery Act conditional loan guarantee commitments to two solar companies to fund three major new solar projects in Arizona, Colorado and Indiana that will create thousands of new jobs.
It will be important, therefore, to achieve full and credible recognition of loan losses, to ensure that capital injections are accompanied by strong commitments to restructuring, and to promote the resolution of problem loans through liquidations or workouts.
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