Commercial banks in California are much different today than they were in the 1950s. One of the most dramatic changes is the shrinking number of banks in the United States. There were 13,200 banks in 1955, and there are now only around 5,300 such institutions. After decades of inflation, the smaller number of banks that exist today control a lot more currency than the larger number of banks did in 1955.
While U.S. banks in 1955 only had assets totaling about $209 billion, banks today have assets worth $15 trillion. Today, bank assets make up 83 percent of the gross domestic product compared to just 49 percent of the GDP in 1955. All banks, but especially smaller ones, are also much more heavily invested in real estate than they were in 1955.
Commercial and industrial loans made up the largest percentage of bank loans in 1955, at 40 percent. Back then, only 25 percent of bank loans were written for real estate. Today, half of bank loans are real estate loans, and only 20 percent of bank loans are for commercial and industrial purposes. Smaller banks that have under $1 billion in assets write 75 percent of their loans for real estate.
With banks engaging in a lot more commercial real estate lending than they did in the past, the health of real estate markets plays a critical role in the stability of the banking system. As such, banks may be less likely to loan money for real estate if they foresee falling real estate prices in the near future. A commercial real estate developer may want to talk to an attorney about changes in the economy that could affect real estate prices and the ability to obtain financing.