LATELY, IT SEEMS that every time we hear about a well-known real estate developer skirting bankruptcy or about how troubled real estate loans are mounting at a local bank, the plight of the lender and the builder alike is attributed to "our depressed real estate market." As if that unpleasant fact of life actually explained anything. It's true that this region's highly distressed real estate market has hurt the earnings and balance sheets of banks -- delinquent real estate loans in Maryland and District banks skyrocketed 122 percent and 100 percent respectively between April 1 and July 1. And the news in recent months has been full of accounts of real estate developers -- magnates and newcomers -- who have been pushed close to the brink. But to infer that the slump is the cause of their problems is wrong; it also tends to obscure the real contribution that they -- builders and bankers together -- have made to the slowdown in the region's economy and to their own plight as well. Their gift, in a word, is overbuilding.

Under the self-imposed pressure to find good business, banks drifted away from their own basic banking concepts and, with little restraint, provided the funding that made it possible for developers to supply the volume of commercial office space in northern Virginia and Bethesda, for example, which grew sharply out of line with any reasonable demand. Hence the ghostly but glitzy "see-through" office buildings along the Dulles corridor -- so named because no one occupies them. The recent lending practices of commercial banks would have been unheard of a decade ago. Then, before a banker would underwrite a commercial real estate construction loan, the developer was expected to bring cash to the deal as equity, and the bank would not lend more than 75 percent of the appraised value of the project. There was little chance that the bank would extend a construction loan without a firm commitment from the builder to prelease the building before construction was completed.

On top of that, banks required a firm commitment ("take-outs") from a permanent lender -- an insurance company, for example -- who would agree to pay off the bank's construction loan. Those sound, and conservative, banking practices went by the boards in recent years, with the excuse that competitive pressures were forcing a lowering of underwriting standards. So today, a glimpse of the books of the troubled banks in this region and around the country will reveal that a good many bankers have extended commercial real estate construction loans -- including money to pay the interest due -- often to hard-charging developers who have been bringing relatively little cash equity to the transactions and no preleasing or take-out commitments from permanent lenders. The banks are in trouble because they financed speculative excesses by developers who lacked the ability to service their debts and pay off their loans except by selling or refinancing the land or projects they owned.

All of this should be of more than passing interest to the rest of us on two scores. Those vacant buildings depress market values and tax revenues at a time when shrinking revenues are forcing drastic cuts in public services. Finally, the deposit insurance fund, which protects deposits in commercial banks, lost money in 1988 and 1989 and probably cannot cope successfully with a series of serious bank failures. So at the end of the day who pays for their follies? The same people who will pay for the S&L bailout.