CRE is probably the weakest link right now as far as bank risk and its MUCH more prevalent in the smaller regional banks. Big banks are getting huge liquidity injections right now. They'll be fine.

redsquirrelAG said:

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YouBet said:

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Phat32 said:

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It appears many are willing the 4-mega bank scenario into existence by putting FUD into the market and short selling all regionals.

Regional banks are a super important part of our economy. Mega banks are terrible at small business and local lending.

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Agreed. I personally don't have a need for a regional bank but many, many do.

I use a mega bank (if Fidelity is considered that) simply because a lot of our investments are there, and I was centralizing my finances as much as possible.

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With one of the big 4. Opening up accounts at a local credit union to begin moving over. I think 1 of the big four fails. Then it could snowball. Some small conservative run banks will have enough and are preparing for that. I've been told some are.

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If anything it's the opposite. The government has already signaled they will bail the big ones out at the expense of smaller ones. There has been almost $1T in deposits that have fled regional banks over this deal.

Which is unfortunate.

It took 4-5 years from start of the credit crisis to hit the significant financial problems in CRE for lenders. Everyone knew it was coming and it ended up nowhere near as bad as feared or even reasonably expected. The nature of CRE and long leases fortunately allows time to find workouts.

Clearly this time is different with utilization rates taking a serious hit due to Covid and WFH sticking. However, time should again allow for workouts, but also right sizing of office CRE could occur via less construction than would have happened, repurposing of office CRE to other types of CRE, and potentially some degree of additional demand over time.

As I understand it, it is the big towers that are worst off right now and they are generally not funded by your local bank. The big banks are the capital behind these properties and most able to weather the storm and find solutions.

CRE will clearly have challenges, but I don't see it causing a huge problem in banks outside of a few isolated meaningful examples. Rather, I think it will lead to lending that is locked up and further hurts access to capital for other business types for an extended period.

Just start loading up the mattress if that's your thesis

I think I've already said in another thread that I think the FDIC should look at the rescues on a case by case basis rather than a blanket guarantee or say "no, nothing over 250k is insured." What grinds my gears about the thought is the some of the folks in charge of doing those case by case rescues are the same ones that 100% backstop uninsured deposits (via a sweetheart deal to JPM) at First Republic, a bank who lent Mark Zuckerberg a 1% mortgage then (Yellen) say that rescuing community bank balances over $250k won't happen because they don't represent systemic risk. The systemic risk is the knuckleheads that give 1% mortgages...you're bailing out crony capitalism not supporting the banking system.

Sims said:

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I think I've already said in another thread that I think the FDIC should look at the rescues on a case by case basis rather than a blanket guarantee or say "no, nothing over 250k is insured." What grinds my gears about the thought is the some of the folks in charge of doing those case by case rescues are the same ones that 100% backstop uninsured deposits (via a sweetheart deal to JPM) at First Republic, a bank who lent Mark Zuckerberg a 1% mortgage then (Yellen) say that rescuing community bank balances over $250k won't happen because they don't represent systemic risk. The systemic risk is the knuckleheads that give 1% mortgages...you're bailing out crony capitalism not supporting the banking system.

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Yep. Agree with this.

Casey TableTennis said:

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It took 4-5 years from start of the credit crisis to hit the significant financial problems in CRE for lenders. Everyone knew it was coming and it ended up nowhere near as bad as feared or even reasonably expected. The nature of CRE and long leases fortunately allows time to find workouts.

Clearly this time is different with utilization rates taking a serious hit due to Covid and WFH sticking. However, time should again allow for workouts, but also right sizing of office CRE could occur via less construction than would have happened, repurposing of office CRE to other types of CRE, and potentially some degree of additional demand over time.

As I understand it, it is the big towers that are worst off right now and they are generally not funded by your local bank. The big banks are the capital behind these properties and most able to weather the storm and find solutions.

CRE will clearly have challenges, but I don't see it causing a huge problem in banks outside of a few isolated meaningful examples. Rather, I think it will lead to lending that is locked up and further hurts access to capital for other business types for an extended period.

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Buddy of mine in banking said this exact thing last week. Their balance sheet is good but they've basically been told that they are going to focus on existing customers and only lend under very conservative circumstances. Business has greatly slowed for them as a result of the uncertainty with all of this.

Sounds like a Frost Bank approach. Same turtling they did in 2009/2010, which is expected and a sign of a conservative bank.

Not that its a bad thing, but the tightened purse strings hits small business and new businesses / entrepreneurs the most.

None of the big banks will ever fail. If they do, we're ****ed anyway so who cares.

The one that's curious to me, but maybe shouldn't be, is JP Morgan Chase. It was just 15 years ago that all the Madoff money was run through them, they pled guilty to 5 criminal charges and were fined $2B. If they had been diligent monitoring the billions running through the Madoff account ending in 703 a lot of suffering could have been avoided. Swept under the rug. Now they get to bargain shop the failures.

You're right, it shouldn't be curious to you.