The special Congressional Oversight panel released its report on Thursday. The panel is set to monitor the $700 billion bailout fund. In its report it warns about the possibility of many mortgage failures on commercial real estate by next year. This could cause banks to see the losses of some $300 billion and also create problems of lending by these banks for small businesses and could also make the economic recovery slow.

The panel, headed by Elizabeth Warren, warns that commercial loan losses could weaken the stability of U. S. midsize and small banks. Some around 3000 small U. S. banks could be forced to cut their lending because of losses on commercial real-estate loans. And the failed commercial real estate loans could make the real estate business even weaker in U. S. over the next several years.

"The government cannot and should not rescue every bad loan or keep every bank afloat, but neither can it turn a blind eye to bank failures and their impact on communities," Elizabeth Warren, the panel's chairwoman, said.

The panel also suggested some possible solutions for policymakers to get rid of a possible commercial real estate crisis. As the panel suggested the Treasury Department to take a stress test of such banks and the government should consider other options also. The government can inject capital into these small banks, buying their toxic assets or guaranteeing loans, the panel suggests.