Banking has changed immensely since the 1950s, in Missouri and across the United States. The total number of banks has dropped from more than 13,200 in 1955 to approximately 5,300 in 2016. In 1955, the assets of the entire U.S. banking industry totaled only $209 billion. Six decades later, the reported assets of banks are in excess of $15 trillion. Banking assets accounted for 49 percent of gross domestic product in 1955; they now account for 83 percent.
The rise of financial derivatives has brought on major changes as well, but it may be that the most significant shift is from the banking industry’s focus on commercial and industrial loans then to its new principal focus, real estate. At the time of the housing bubble, real estate loans accounted for 60 percent of total bank loans, and real estate securities made up 74 percent of total banking securities.
The National Banking Act of 1864 prohibited national banks from loaning money for real esstate. The Federal Reserve Act in 1913 loosened the restrictions, and 1927’s McFadden Act loosened them further. The danger of a rapid fall in real estate prices is central to the risk of leveraged real estate.
Compared to the 1950’s, the banking industry today looks very different. It is, and will remain, an integral part of commercial real estate investing and development. The regulations that impact banks also impact markets of all kinds. An attorney with experience in commercial real estate law may be able to help interested parties navigate necessary regulations or anticipate lender requirements or other hurdles. An attorney may be able to assist with commercial development or acquisition by drafting the necessary legal agreements.
