Does Extend Mean Pretend?: Six Challenges to Conventional Wisdom
One of the most common refrains in the commercial real estate industry today relates to the approach by commercial banks toward their underperforming loans. We constantly hear pundits and other market experts speaking derisively of the “extend and pretend” strategy and its deleterious effects on the banking system and overall market. Implied is the assumption that these lenders are either unaware or unwilling to accept their problems and that this is impairing credit flows that would be restored if they only faced up to and acknowledged reality. We view this as both overly simplistic and considerably flawed and instead see a highly rational and fiscally responsible approach.
The conventional wisdom is that regulators and bankers are, at best, slowing a recovery and, at worst, paralyzing the market. “Extend and pretend” has been repeated like a drumbeat in financial pages, congressional testimonies and trade events by a pervasive universe of market