Letter to The Wall Street Journal, Nov. 6

Don't Follow Failed Japanese Example

The new regulations allowing banks to classify underwater commercial real-estate loans as "performing" will create "zombie" banks that will plague our economy well into the next decade ("Banks Get New Rules on Property," Money & Investing, Oct. 31). These regulations mimic the failed Japanese approach of the 1990s and will, unfortunately, have the same effect. Simply put, weighed down with bad loans "zombie" banks don't lend.
Instead of restructuring real-estate loans, the underlying banks should be restructured through equity infusions from the public or with TARP funds, with the underlying real estate sold into the marketplace. Broadly speaking, that was the Resolution Trust Corp. solution of the early 1990s.
David Shulman
Berkeley Heights, N.J.
Mr. Shulman was head of real-estate research at Salomon Brothers from 1986 to 1991 and was senior REIT analyst at Lehman Brothers from 2000 to 2005.

In the Dow Jones Newswire, "Wells Fargo Defers Reckoning On Troubled Mortgage Balances," Nov.3

Because of troubled borrowers like Annan, Wells Fargo risks tethering itself to what former Wall Street executive David Shulman terms "wasting assets," since borrowers facing years of negative home equity have little incentive to maintain or improve their homes. "You've got to give the homeowner incentive," says Shulman, now a senior economist at UCLA Anderson Forecast. "Otherwise, they're sitting there as a tenant."
http://online.wsj.com/article/BT-CO-20091103-709084.html?mod=wsjcrmain