Chicken Little pays a visit.

• Author: RUNDLES, JEFF
• Position: Report says that Denver, Colorado is in danger of overbuilding commercial real estate - Brief Article

WHEN THE FDIC SAYS WE'RE "AT-RISK," WE SHOULD BEGIN TO CLUCK

Is the sky falling?

I am just a little too chicken to make a bold pronouncement that the Denver and Colorado economies might be ripe for a fall, but I did note a recent report from the Federal Deposit Insurance Corp. that things here are "at risk."

And I note with even greater interest that some real estate folks are defending the building boom. I've heard this song before. It's like opera. The confident tenor sings of strengths, while the soprano goes off into the highlight aria filled with fear of imminent doom. I suppose it's no coincidence that most operas are tragic.

The FDIC warned in its report that Denver, along with 12 other cities, is vulnerable to overbuilding commercial real estate space, in part because of its exposure to high-tech companies. The report stated that "rapidly growing construction and development loan portfolios at banks and thrift institutions in at-risk markets raise concern." In addition to high-tech industries feeding the commercial building frenzy, the FDIC noted that Denver is heavily dependent upon the so-called FIRE sectors -- Financial, Insurance and Real Estate, business sectors closely linked to the volatile stock market. The report suggested -- strongly -- that a downturn in the market and WHAMMO, Denver financial institutions are sitting on a ton of loans susceptible to foreclosure.

We've been here before. In fact, several times. But one year is particularly instructive: 1984. Back in the early 1980s the Denver economy, based almost entirely on the shaky pillars of one industry -- energy -- was booming right along. Banks and thrifts were making commercial construction and development loans like they were going out of style. People joked at the time that the Colorado state bird must indeed be the crane, because there were so many of them soaring above the skyline. It all came down like a house of cards in 1984, in what seemed like an instant, when the bottom fell out of oil prices.

There were some people at the time who worried about overbuilding and vulnerability And there were many -- particularly those who were making incredible livings off construction and...