alt Hacker NewsThe bank knows but they maintain the fiction that they don't because their books collapse too if they count those. Banks make money from loans.
Don't forget this is typically a short term things. When the economy improves the building will be rented again. So they need the books to look good today to get through.
Replies
> Don't forget this is typically a short term things. When the economy improves the building will be rented again.
In my experience in many cases this is not true. The shift toward online shopping, for instance, has meant that a lot of retail properties have no realistic chance of recovering to previous values. The accounting shenanigans described in this thread are just a way for various people to play make-believe that their properties haven't already lost value permanently.
And commercial loans are NOT like your home mortgage. One you got your home loan, the bank no longer cares (or even can care) about the value of the house, only if you’re not actively destroying the property and maintaining insurance and paying on time.
Commercial loans are often shorter duration and roll over and highly tied to the valuation of the property or properties, and often have clauses allowing them to call the loan if valuation dips too much (think: margin call).