Why are banks trapped in real estate? Because with a 100k dollar deposit they created 1m in loans. Those loans lost 25% to 50% of their collateral value in the last few years. Then banks did not have to mark to market easing their short term bind, but not changing the fact their still insolvent. A small bump in interest rates will have a very negative impact on a highly leveraged economy. Deflation is coming and it wont leave easily.