We’ve been waiting for the second of many shoes to drop which will include the next round of residential mortgage resets AND the bottom falling out of the commercial real estate market. It appears some guys way more fluent in the aspects of the monetary problem (because they created it) are a bit edgy themselves. At what point can we abolish The Fed and get the entire concept of central banks (and the government credit card) out of our wallets? (Did you know that the FBI considers Americans that call themselves ‘sovereigns’ to be terrorists? I’ll save that for another post.)

European Central Bank’s Report Issues Warning

FRANKFURT — Despite recent improvements in the health of European banks, they remain vulnerable to a daunting array of hazards that are expected to produce another round of sizable write-offs during the next couple of years, the European Central Bank said Monday, in a report that cataloged in alarming detail the problems facing the region’s financial institutions.

The challenges for banks in the 16-nation euro zone include exposure to a weakening commercial real estate market, hundreds of billions of euros in bad debts, economic problems in East European countries, and a potential collision between the banks’ own substantial refinancing needs and government demand for additional loans, the central bank said. (emphasis mine)

In its twice-yearly review of risks facing the nations that use the euro currency, the central bank expressed particular concern about banks’ need to refinance long-term debt of an estimated 800 billion euros, or $984 billion, by the end of 2012.

Borrowing costs could rise as the banks compete with governments in the bond market, “making it challenging to roll over a sizable amount of maturing bonds by the end of 2012,” the report said.

It’s coming kids.  You know it in your gut.  I’m expecting the dominoes to start falling sometime this month.