In case you've still got money in a bank, Bloomberg is warning that defaults in commercial real estate loans could "topple" hundreds of US banks. Leaving taxpayers on the hook for trillions in losses. The note, by Senior Editor James Crombie, walks us through the festering hellscape that is commercial real estate.
When bad behavior is papered over again and again, a society builds on malinvestment. Doubles down on stupid, because that’s what endless credit expansion does. It allows a person, a business, a government and a culture to put off the consequences of gluttony for seemingly forever. ‘Make it someone else’s problem’, they say.
I wait for these moments for the pounce point. Sometimes takes a decade or more for the correction in asset prices, but the corrections do come. Every time.
Just like the good times of 2009 where wise investors were able to pick up properties at 10 cents on the dollar of cost of replacement… this one is going to be even bigger. Thinking 1929-1930 style and is all so positively delicious.
As my grandfather always told me, and he lived through the panic of 1907 and witnessed the creation of the leviathan spawned on Jekyll Island as well as the Great Depression, "always sell when the cotton is high and the sun is shining. Never buy until you see bodies in the streets running deep with the blood of stupidity."
Grab a cold beer and the popcorn while we watch this epic bubble deflate.... violently deflate.
Lowering interest rates is not a solution to the massive post-bubble distress in commercial real estate. In fact, no "solution" is necessary. Banks and other speculators that engaged in poor lending/investing practices should simply fail.
What the Fed is doing now, through forward guidance of interest rate cuts, is to build back the bubble in CRE and other assets, thus cushioning potential failures like those discussed here. This is the standard and endless boom-bust cycle.
Unfortunately, my local bank, Flagstar, is now in bed with NY Community. I asked the bank to clarify how the current troubles at NYCB affect them but they said all is well. Spooky. I have used Flagstar for about 17 years and really don't want to have to find something else.
But where to go? Maybe a credit union. Certainly no big banks. Of course as the commercial RE implosion gets worse, most banks will be affected. It's like a system of dominoes. I expect the Fed to have to bail these corrupt banks out again like they did in 2008-09.
Then the CEOs will give themselves bonuses like they did during the last RE blowup.
Actually it's way worse for the FDIC. They only have 1.38% coverage and that's for a select few. On top of that, while Biden was pushing vaccine mandates, Congress passed a bill allowing banks to do “Buy in's”. So you know, any money that hits that bank account is the “Banks money”. It's not yours until you use it. Hence why pulling out more than 500.00 dollars cash out of the bank comes with a torrential amount of questions. The Banks lended 100% of your money to these big investments while at one time they needed to hold back at least 10% the Fed gave them the Freedom to invest 100% of your deposited money into system designed to fail as soon as they enforced lock downs.
Forgive my seeming naivety, but I was under the impression that the commercial real estate problem has specifically to do with the ongoing structural changes to the economy resulting from the unprecedented COVID pandemic. Instead I'm seeing in these comments all kinds of allegations of malfeasance and corruption e hardly a word linking it to the pandemic.
Sp what's the deal - is this about corruption or is this about the pandemic?
When bad behavior is papered over again and again, a society builds on malinvestment. Doubles down on stupid, because that’s what endless credit expansion does. It allows a person, a business, a government and a culture to put off the consequences of gluttony for seemingly forever. ‘Make it someone else’s problem’, they say.
I wait for these moments for the pounce point. Sometimes takes a decade or more for the correction in asset prices, but the corrections do come. Every time.
Just like the good times of 2009 where wise investors were able to pick up properties at 10 cents on the dollar of cost of replacement… this one is going to be even bigger. Thinking 1929-1930 style and is all so positively delicious.
As my grandfather always told me, and he lived through the panic of 1907 and witnessed the creation of the leviathan spawned on Jekyll Island as well as the Great Depression, "always sell when the cotton is high and the sun is shining. Never buy until you see bodies in the streets running deep with the blood of stupidity."
Grab a cold beer and the popcorn while we watch this epic bubble deflate.... violently deflate.
Nay... implode ))
Lowering interest rates is not a solution to the massive post-bubble distress in commercial real estate. In fact, no "solution" is necessary. Banks and other speculators that engaged in poor lending/investing practices should simply fail.
What the Fed is doing now, through forward guidance of interest rate cuts, is to build back the bubble in CRE and other assets, thus cushioning potential failures like those discussed here. This is the standard and endless boom-bust cycle.
I've decided that in 2024, my greatest investment will be in my health
Silver>Gold
Don’t think for a moment this isn’t planned and orchestrated. Consolidating to what form of banking system? Walmart and Amazon comes to mind….
Unfortunately, my local bank, Flagstar, is now in bed with NY Community. I asked the bank to clarify how the current troubles at NYCB affect them but they said all is well. Spooky. I have used Flagstar for about 17 years and really don't want to have to find something else.
But where to go? Maybe a credit union. Certainly no big banks. Of course as the commercial RE implosion gets worse, most banks will be affected. It's like a system of dominoes. I expect the Fed to have to bail these corrupt banks out again like they did in 2008-09.
Then the CEOs will give themselves bonuses like they did during the last RE blowup.
What do you recommend we do if we have funds in bank checking/savings accounts?
Would be interested in hearing your take (forgive the pun) on "The Great Taking."
Actually it's way worse for the FDIC. They only have 1.38% coverage and that's for a select few. On top of that, while Biden was pushing vaccine mandates, Congress passed a bill allowing banks to do “Buy in's”. So you know, any money that hits that bank account is the “Banks money”. It's not yours until you use it. Hence why pulling out more than 500.00 dollars cash out of the bank comes with a torrential amount of questions. The Banks lended 100% of your money to these big investments while at one time they needed to hold back at least 10% the Fed gave them the Freedom to invest 100% of your deposited money into system designed to fail as soon as they enforced lock downs.
Forgive my seeming naivety, but I was under the impression that the commercial real estate problem has specifically to do with the ongoing structural changes to the economy resulting from the unprecedented COVID pandemic. Instead I'm seeing in these comments all kinds of allegations of malfeasance and corruption e hardly a word linking it to the pandemic.
Sp what's the deal - is this about corruption or is this about the pandemic?
I can't wait to see how well this shapes up for the mega banksters!
Where is this 5.5% inflation number coming from? Last PCI was 3.2% wasn't it?