The Fed is starting to get worried about the $2 trillion commercial real estate market

This article is from earlier this year but very relevant with the 14 Senators that voted for the CRE (Commercial Real Estate) protection in the tax bill, including Bob Corker.
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http://www.businessinsider.com/fed-worries-2-trillion-commercial-real-estate-market-2017-2

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What concerns the Fed about CRE aren’t the valuations per se, but the fact that the sector is highly leveraged, and that when prices collapse, which they tend to do, the collateral value gets crushed, and banks are left to twist in the wind. That’s what happened during the Financial Crisis.

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The Fed is careful not to sow panic among bank investors. So it couches its message in a big “while” and some other mollifying words, before getting to the meat at the very end of its long sentence, namely that a “sizeable” decline in CRE prices could take down “smaller banks”:

While CRE debt remains modest relative to the overall size of the economy and the tightening in bank lending standards for CRE loans in the second half of last year may reflect some reduction in the appetite for CRE lending, the heightening of valuation pressures may leave some smaller banks vulnerable to a sizable CRE price decline.

And “smaller banks” are precisely what’s the most on the hook: they hold about $1.22 trillion of these CRE loans.

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Boom and bust – that’s the nature of the sector. Only this time, historically low interest rates for eight years and the resulting wild chase for yield among desperate investors have created the most magnificent CRE bubble ever with the most leverage ever. And I have no idea how the Fed is going to unwind its handiwork softly without pulling the rug out from under the banks and CRE investors.