To put the financial picture into perspective, though, CRE loans are just $7.1 billion or 14% of Comerica's full stack of outstanding loans. The financial team reported non-performing loans, excluding commercial, rose 61 bps, driving the watch list total to 9.3%. "This will increase as we provide excess net charge-offs," Babb said.

Non-accrual loan write-downs averaged 28%, according to the executive team. Babb squarely put the blame on the doorstep of commercial developers of residential product in the California market, where 85% of the 150 projects are on a watch list--virtually all rolling onto the roster in the past six months.

In comparison to its peers, Babb said the non-performing portfolio and watch list are "manageable" tallies. The plan is to limit exposure by reducing the business that it books in California and focusing on the middle market. "Outside of commercial real estate, all the business lines were displaying good credit in the second quarter," Babb said.

Babb admitted Comerica's team "missed" the mark in California's valuation drop. "It was overpriced and we didn't see it coming that it would stop," he told analysts. The outcome is Comerica has implemented "tougher stress factors," he said. "The good news is it's contained and we'll move forward." New appraisals are underway for the California properties as part of the repositioning plan.

To cope with Freddie Mac and Fannie Mae, Babb said Comerica plans to "selectively reduce its outstanding loans" by $2 billion to $3 billion in 2009. The staff too will be consolidated and cut, where possible. "This plans does not hinder our ability to grow new relationships," he stressed. "We are working hard to leverage technology and maximum productivity to execute on our growth strategy. And, we are working hard to stay ahead of the credit issues in a continued weak economic environment."