Commercial banks moved heavily into equipment leasing during the early1970s, acting as lessors. One major reason for this invasion of the leasingindustry was to gain the benefits of accelerated depreciation and the investment tax credit on leased equipment. During this same period, commercialbanks were investing heavily in municipal securities, and they were alsomaking loans to real estate investment trusts (REITs). In the mid-1970s, theseREITs got into such serious difficulty that many banks suffered large losseson their REIT loans. Explain how its investments in municipal bonds andREITs could reduce a bank’s willingness to act as a lessor.
Commercial banks moved heavily into equipment leasing during the early1970s, acting as lessors. One major reason for this invasion of the leasingindustry was to gain the benefits of accelerated depreciation and the investment tax credit on leased equipment. During this same period, commercialbanks were investing heavily in municipal securities, and they were alsomaking loans to real estate investment trusts (REITs). In the mid-1970s, theseREITs got into such serious difficulty that many banks suffered large losseson their REIT loans. Explain how its investments in municipal bonds andREITs could reduce a bank’s willingness to act as a lessor.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Commercial banks moved heavily into equipment leasing during the early
1970s, acting as lessors. One major reason for this invasion of the leasing
industry was to gain the benefits of accelerated
banks were investing heavily in municipal securities, and they were also
making loans to real estate investment trusts (REITs). In the mid-1970s, these
REITs got into such serious difficulty that many banks suffered large losses
on their REIT loans. Explain how its investments in municipal bonds and
REITs could reduce a bank’s willingness to act as a lessor.
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