Professor Alan Ahearne:

I had known from my own experience and research that a big property crash is always damaging to banks. There have been times, as I wrote about, where it has put the entire banking system, or large parts of it, into insolvency, for example, in Scandinavia. There have been times where although the property market has crashed, the banking system has got through that without that much damage. Hong Kong is an example. I covered that economy at the Fed. It had a 50% decline, peak to trough, in property prices. It was a really bad crash in the property market but it did not burst the banks. The banks more or less sailed through that. I did not have information to make predictions about what the crash in the property market would do to the banks. It depended on many factors.