Let’s see, Leon Black of Apollo Management, which is a very savvy real estate player, warned of a coming “black hole” in commercial real estate six months ago.

US bank regulators seem to be taking warnings of his sort seriously only now.

The Fed is poking its nose into the portfolios of some banks, oddly taking great care to say these are NOT stress tests (is that meant to say they are not bogus and actually involve people who might know a tad about the underlying assets?)

Reader John L provided this tidbit:

I just spoke with a friend who does environmental studies for banks before they lend against the properties. He said that the FDIC is in the process of getting pre-approved bidders for work of this sort, mostly sampling of the air and soil on the sites. His problem was with the bidding process, they wanted a flat bid for a sample from the northeast (NY, VT, MA, NH, CT, RI, PA, DE). His answer was to quadruple his cost. The majority of the cost is getting someone there(background check required) to take the sample. The US was split into 7 zones. Flat item bid for each type of sample in each zone. Just thought it was interesting, maybe the FDIC is thinking they are going to have to get into the CRE buisiness in a big way.

For those who are curious about such matters, the consultant looks at the deed to see who owned the property in the past, which determines whether sampling is needed. Pretty much every gas station is a Superfund site. Dry cleaners and auto repair shops also get flagged.

The Financial Times reports on the Fed’s efforts. This is being positioned more as research than bank-level exams, but it begs the question of why they waited so long to get the overview.