Lewis Ranieri, the mortgage-bond pioneer, said the U.S. housing market is "still very fragile" and commercial real estate is at the beginning of a cycle that will damage banks, potentially disrupting the economic recovery.

The financial system "isn't fixed yet, it only looks like it's fixed," Ranieri, the chairman of New York-based Hyperion Partners LP, said in an interview Tuesday.

With the economy still weak, declining property values will hurt banks in part because many business loans are secured by the borrowers' real estate holdings, a potential source of losses separate from lenders' mortgage assets, Ranieri said.

"Small-business values evaporate like mist in the sun, so that's why banks always make them secured loans," he said. "Unless you're thinking of a sharp V-shaped recovery — and most of us are really holding our breath about the first and second quarters — the future of real estate values may make a big difference" for commercial and industrial loans.

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