Western Banks,the Dollar, Fiat Currencies Going Bust

I think the title says it all.

I created this thread as a place for bank collapse and dollar devaluation/threat issues. The two are tied together in today's fragile economy.

The dollar is vastly overprinted and banks count real estate current values toward their own value. The mess is the proverbial "House of Cards".

Obviously as economies collapse, society will not react well, requiring sensible people to prepare for that chaos.

 

"Bumper Week For Banks & Big-Tech But Bonds Suffer Biggest Bloodbath In A Year"

https://www.zerohedge.com/markets/bumper-week-banks-big-tech-bonds-suffer-biggest-bloodbath-year

" 'The things we were most worried about didn't get worse...' was the phrase overheard on one business media channel to sum up why the markets rallied this week..

" Comments from Treasury Secretary Yellen were interesting given the big gains in regional banks this week as CNN reported her telling the big bank CEOs that 'more mergers may be necessary'...

"Which roughly translated means: more bank failures are imminent - which is ironic given that regional bank stocks soared almost 10% this week - the best week since Nov 2020 - but Yellen's comments spooked them today...

"Then Washington peed in the punchbowl as House Speaker Kevin McCarthy’s top debt-ceiling negotiators reportedly 'abruptly left a closed-door meeting with White House representatives soon after it began Friday morning, throwing the status of talks to avoid a US default into doubt.' Thus crushing optimism over the debt-ceiling talks.

"While a handful of MegaCap Tech names led the markets higher, retail stocks were clubbed like a baby seal after TGT, WMT, and FL (FootLocker) also signaled the consumer may be weakening significantly this week...

"Source: Bloomberg

"...and remember, a seemingly / outwardly “bullish” debt-ceiling deal getting done actually perversely instead releases a new wave of tightening, particularly due to a massive TGA rebuild thereafter with ENORMOUS T-Bill issuance in the months thereafter, creating a monster liquidity drain.

"So, be careful what you wish for and maintain light positioning (the latter harder than it sounds amid the AI-phoria)."
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"Raising Financially-Educated Children"

https://www.homeschool.com/blog/2023/05/raising-financially-educated-children/

"As parents of little ones, if our job is to prepare them for the world that awaits, shouldn’t that include the money system? Not just the basics of finance – saving, spending, investing, and debt – but the essence of money: What is money, what works well in the role, and how is money created?

"Article 1, Section 10 of the US Constitution calls for that: 'No State shall… make anything but gold or silver coin a legal tender.'

"America’s founders understood the importance of money backed by gold or silver. But today’s money isn’t backed by anything. It can be created from nothing by banks and bureaucrats.

"This is a problem.

"Sound money, along with liberty, personal responsibility, limited government, and the concept of natural law, unleashed an economic engine that raised the living standards of America, creating the most prosperous nation the world had ever known. Americans lived like kings, white picket fence around a tire swing hanging in the yard, two cars, three kids, and central air-conditioning.

"Because fiat money does not require gold backing, it can be created at will by governments and banking cartels, siphoning productivity gains from working people to the rentier class.

This freshly printed money is used to grow the bureaucracy, funding endless wars, massive entitlements, and ever-increasing boondoggles. We pay for this through inflation, theft of purchasing power from the dollars held in our bank accounts, and increasing prices from all the new money not earned through work or trade but created from nothing to chase the same level of goods and services.

"Worse, entrepreneurs receive distorted signals about supply and demand, creating ‘malinvestment’, a boom-bust cycle of financial bubbles blowing, bursting, then being bailed out (selectively).

"American families are poked, prodded, nudged, and cajoled into borrowing because a debt-based system requires endless growth. Every dollar in existence is issued as a loan and therefore requires repayment of principal plus interest – more dollars tomorrow than today – more GDP, more energy, oil, coal, corn, copper, cattle, and cobalt. If it’s not growing, the financial system is collapsing.

"Today’s system of money requires endless growth on a finite planet. It’s quite literally doomed to fail, the root of the world’s biggest, most intractable problems.

"As it unwinds, a huge concern is all the US Dollars held overseas. As confidence wanes in our ability to maintain their purchasing power, a tsunami of dollars risks flooding back to American shores.

"They can’t teach it in school because that would reveal the con. Kids are pushed out at 18 like wind-up toys to get chewed by a debt machine, offered only two choices by a political system that both feast on the power to create money from nothing and reward insiders. It’s cronyism, not capitalism.

"They grow up fast. One second, you’re cutting grapes in half, and the next, they’re fending for themselves in a mixed-up world, an unanchored mess of finance and debt. Don’t miss the opportunity to open their mind, revealing the True North that our modern money system lost long ago."
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Amerika:

"Treasury set to borrow $776 billion next quarter, the most ever borrowed in the fourth quarter"

https://krdo.com/news/2023/10/30/tr...the-most-ever-borrowed-in-the-fourth-quarter/

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"UK net debt hits highest level in more than 60 years, topping 100% of GDP"

https://www.cnbc.com/2023/06/21/uk-...-than-60-years-topping-100percent-of-gdp.html

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"Germany’s true economic disease"

https://www.socialeurope.eu/germanys-true-economic-disease

"Germany is indeed ‘sick’, Peter Bofinger writes—but not for the reason most commentators think.

"For the second time, the Economist has diagnosed Germany as ‘the sick man of Europe’.

"... Germany is the only country apart from Argentina whose gross domestic product will decline in 2023. In 2024, it will still be one of the countries with very weak growth.

"Of course, Germans are aware of this poor performance. But in the public debate the main culprit is ‘bureaucracy’—the government. While German bureaucracy is often slow and inefficient, one has to ask whether this really explains the underperformance of the economy.

"The International Institute for Management Development provides an annual international ranking of government efficiency. In 27th place, Germany’s bureaucracy is not outstanding. But its competitors tend not to fare much better: the United States ranks 25th, the United Kingdom 28th and China 35th, while Japan, France, Spain and Italy are even further adrift."

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Hilarious thing about the guy writing about the decline in the German economy is that he recommends as a solution more Keynesian pump-priming! What an idiot!!!!

The uber-controlling German banks need to just drop dead and take the stupid euro with them. Socialism and its supporters need to go to hell and stay there. The banks in Greece, Spain, and Italy are dead -- only life-support keeps up the pretense. Let all of the arrogance collapse and die.
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"What is Money? Who Controls Money?"

https://mises.org/wire/what-money-who-controls-money

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In 1973, Henry Kissinger is purported to have said (though it is disputed): “Who controls the food supply controls the people; who controls the energy can control whole continents; who controls the money can control the world.”

Whether he said it or not, it is true. However, he would have to have been talking about credit.

Since the United States closed the gold window in 1971, the dollar has had less and less gold backing it as the US Federal Reserve banksters have created more and more fiat currency.

It is worth noting that Henry Kissinger was a founding member of the Club of Rome, which had as one of its goals to control the world population and its resources. He was also the guy who got the Arab Emirates and Saudis to only sell oil in US dollars; hence, he oversaw the creation of the petrodollar. The latter has aided in this control.

It follows that, in the current world system, petroleum is also money. However, cracks are starting to form in that system as the BRICS nations (Brazil, Russia, India, China, South Africa, and now Saudi Arabia, among other countries) have created an alternative trading bloc, and the Saudis are taking other currencies for their oil. However, unless the BRICS nations use real money—gold—to exchange goods and services in their trade, they will just be trading another fiat currency for the US dollar. All fiat currencies will go to zero eventually because they always have. When they do, the theft is exposed to all those holding the useless currency.

By that time though, the banksters have gotten what they wanted. They have sucked the wealth (gold, oil, land, and other real commodities) out of the nations using their banking cartels and the military of the US and other Western countries.

In line with Kissinger’s 1973 statement, the same banksters are now coming for your food supply and your energy supply. Man-made global warming is being used as the excuse to shut down agriculture and so-called fossil-fuel electric power generation, which is the backbone of our modern industrial world. The megabillionaire corporate and bank owners already control much of these, but they want it all. As a result, “climate change” is being used now to take everything else they haven’t taken though the debasement of the currency.

Think about that! For six thousand years, gold and silver was money! Since 1971, the globalist bankers have moved the population off honest moneys onto fiat bank notes, then electronic digits, and now they are going “full monty” with central bank digital currencies backed by nothing of any substance.

There is nothing new under the sun. All fiat currencies of whatever kind will collapse! The cycle of life tells us that the wicked will be destroyed eventually as the edifice of their fiat money system collapses and we have a global reset. It might be their planned Great Reset, but even that will only be for a short time because even central bank digital currencies are just another fiat currency.

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OldGzr: I like to think about guns and ammunition as being currency. This in that you don't own anything unless you can protect it. Why were armies formed? For tribes, then nation-states, then countries to protect their treasures. Seems treasures are of primary worth, because historically-speaking, human lives mean next to nothing. Wars are bleed-offs for population growth. The coming planned massive wars could also be considered bleed-offs. The global oligarchs want to reduce populations AND steal the treasures -- a common theme throughout human history.

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Are fiat currencies in deep trouble? Central banks sure do think so! They are literally buying hundreds of tons of gold -- just lately, 800 more tons of gold, to be precise.

"Central Banks’ Gold Buying Frenzy Set To Continue in 2024"

https://oilprice.com/Metals/Commodi...ld-Buying-Frenzy-Set-To-Continue-in-2024.html

"Central banks have been buying gold at record levels, with China and Russia leading the way, as a strategic response to economic uncertainty and de-dollarization.

"The U.S. Federal Reserve's potential easing of monetary policies in 2024 and existing inflation fears are driving central banks to hedge with gold.

"Global political instability, including the upcoming U.S. presidential election, is further encouraging central banks to increase their gold reserves.

"The first half of 2023 was a record-breaking moment for central bank gold buying, led by none other than China and Russia. Organizations like the World Gold Council reported a staggering increase compared to 2022:

“ 'On a year-to-date basis, central banks have bought an astonishing net 800t, 14% higher than the same period last year.' ”
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I think that the prices of gold and silver have grown too high -- certainly too high for me to buy.

However, there are reasons to believe that these prices will go even more ridiculously high.

Precious metals won't do you any good (or very little good) during a Mad Max SHTF scenario. During economic free-fall times prior to full-scale chaos, these could pay your bills / allow you to trade when paper currency has turned to toilet paper. Me I don't go for gold. Flash that in hard times and you'll get knifed & robbed. Old silver coins I've always liked. One great uncle of mine would give me a silver dollar when we visited, great guy not just a great uncle. God bless his soul in the next world!

Anyway, those among y'all who wish to still buy gold or silver, right now could be your very last chance to do so. The world banks have gone full hinky. Why? Because the important bankers believe fiat currencies are soon going to die.

"The Incoming Gold Shortage Nobody Is Talking About"

https://www.zerohedge.com/markets/incoming-gold-shortage-nobody-talking-about

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"Having been a bank director, Alasdair MacLeod knows a thing or two about the health of the banking system, and how to spot one that’s contracted something. Talking to Liberty and Finance, MacLeod explained that the banking crisis we’ve been seeing is very much a top-down issue starting from central banks.

It’s a tale as old as bailouts: if the average person managed their money as badly as big banks, they wouldn’t have a penny to their name. But then the same applies to an even greater extent in comparison between central and private banks, says MacLeod, with the former having basically zero accountability.

Liquidity is another thing they’re lacking, to summarize MacLeod’s lengthy and well-presented overview of the banking sector.

Most interestingly, perhaps, MacLeod says that central banks aren’t so much buying gold as they are getting rid of paper currency. We’ve all heard of this interpreted as diversification or de-dollarization. Maybe that’s just a polite way of talking around the issue. In reality, central banks are using paper money to buy gold – and not just foreign currencies, but their own as well.

Why would they do that? MacLeod says we only need to look to gold’s fundamentals for an answer. By 2025, the U.S. federal government will owe some $40 trillion in debt, which (if you’ll forgive the pun) there’s absolutely zero interest in ever paying off. Politicians might talk about balancing the budget, they might hand-wave about paying down the debt. Instead of listening to what they say, watch what they do. Find any elected government official willing to spend less on his own constituents – I challenge you.

I just don’t think the federal government is able to pay down its debt. Not without truly massive changes to “business as usual.” Interest payments already set us back over $1 trillion in the fourth quarter of 2023! As we’ve noted many times, inflation is the preferred method of “paying off” debt a government owes in its own currency.

To this end, MacLeod notes that governments are printing trillions in currency annually to prop up their economies with limited results – other than the certainty of inflation and higher interest rates down the line. As interest rates rise, money-printing will accelerate to match, resulting in even higher inflation to offset the debt and relieve pressure. (And to think, we’re yet to experience the effects of a single rate cut despite the current high rates!)

Despite gold’s price rising over the last three years, MacLeod believes we aren’t really seeing a bull market yet. He says that interest in gold is disappointing, with nearly every investor, public and private, severely underweight in gold. MacLeod estimates that, of the $150 trillion in global savings, less than 1% is currently in gold.

Nevermind prices: when these portfolios adjust to 5%, 10% or even what MacLeod finds a more reasonable 15%, where is the gold going to come from? Merely adjusting to 2% would require 23,000 tons of physical gold! That’s 10% of all the gold mined in human history…

We already know what a 1,000 ton annual purchase for two consecutive years does for gold. We’ve seen it over the past two years with the official sector. Since central banks aren’t likely to stop these purchases, MacLeod leaves us wondering just how soon the rest of the world will catch on.

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There is not just one SHTF scenario.

There are varying degrees of collapse -- mild, medium, and total.

Were there to be a cobalt bomb nuclear exchange, this would result in all people living in the northern hemisphere to die. No matter your prep.s, no matter where you live in the northern hemisphere, you WOULD die -- zero chance of living.

We likely will see an incremental descent into chaos. One prepares for each stage of the downfall of their own country / region. Should your country go full Mad Max, then only the young and very robust will make it to the other side of the SHTF years / decades.

There will be numerous events which combined over time will lead to a massively grim world situation. Mass die-offs will not likely come in one fell swoop.

Me, I see there being regions hither-thither in the northern hemisphere where living through it all will occur for the prepared. If one is living in an over-populated country, then that person's odds of living through a 9 out of 10, or a 10 out of 10 scenario is rather low. Very many countries are now unable to feed their own populations with the agricultural base they possess. They must import food. This is a exceedingly dangerous situation. Western Canada is one large area with a low-density population that could be spared the worst of the worst -- if you can make it through the winters. Cities and regions near urban areas are at the highest risk.
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Faith in the fiat US dollar is falling rapidly.

"PAMP It: Costco Selling Up To $200 Million In Gold Bars Per Month, Wells Fargo Estimates"

https://www.zerohedge.com/commoditi...-200-million-gold-bars-month-wells-fargo-says

Begin quote

Last December, wholesale retailer Costco announced that they had sold over $100 million worth of gold in Q3 2023.

"You've probably read about the fact that we're selling one-ounce gold bars. We sold over $100 million of gold during the quarter," sad CFO Richard Galenti.

Now, Wells Fargo estimates that Costco "may now be running at" $100 million to $200 million per month in gold sales.

"Our work suggests there has been significant interest given COST’s aggressive pricing and high level of customer trust," said analyst Edward Kelly in a Tuesday note to clients. "The accelerating frequency of Reddit posts, quick on-line sell-outs of product, and COST’s robust monthly eComm sales suggests a sharp uptick in momentum since the launch," CNBC reports.

Sales of Costco gold bars are now limited to five per customer (up from two), while executive members receive 2% back. Those who use their Citigroup credit cards will receive a further 2%.

Spot prices for gold have notably been on a tear this year, rising over 13% YTD amid persistent inflation, nearly $35 trillion in national debt (and growing), and investor fears over the state of the 'deteriorating US fiscal situation,' according to the report.

End quote

 

"Congressional Spending Goes Full Weimar"

https://www.americanthinker.com/articles/2024/04/congressional_spending_goes_full_weimar.html

Begin quote

It has become a speculative game in the blogosphere to predict what black swan calamities could lead to a breakdown in civil order and the imposition of some form of martial law. Wars and rumors of war abound. We have already seen a container ship mysteriously knocking down a bridge and closing a key port. Other such scenarios include massive cyber-attacks that shut down the grid and block communication and transportation networks nationwide. The speculation on the variations of such events is virtually endless.

However, one crisis is no black swan and is entirely expected, already happening, and growing in scale by the day. That would be the ballooning debt crisis. If Washington does not change its free-spending ways, the debt will become a catastrophe of devastating proportions that will tear the nation apart. So long as Congress continues its multi-trillion-dollar deficit spending, we will have a financial death spiral, similar to events a century ago in the Weimar Republic of Germany.

The total discretionary spending for the U.S. government in Fiscal Year 2024 is approximately $1.70 trillion. This amount is split between $886 billion for defense and $688 billion for non-defense programs. In the fiscal year, the U.S. government is also projected to spend approximately $4.19 trillion on mandatory programs. These programs include interest on the debt, Social Security, Medicare, Medicaid, VA, and other programs. We have an annual structural deficit in excess of $2 trillion that will soon grow exponentially.

As a result of their incompetence, the debt is now growing at an accelerating rate. The $1 trillion move from $31 to $32 trillion took about eight months, and the increase from $33 trillion to $34 trillion took about 100 days. While these numbers are bad enough, it becomes alarming knowing that another trillion dollars of debt will be added every 90 days, then 80, then 70, and in ever smaller time frames into the future.

Currently, gross interest on the debt is roughly $1 trillion annually. But in three years, annual interest could surpass $2 trillion. In 10 years, interest on the debt could reach $5 trillion yearly.
The problem with rolling over old debt is compounded by borrowing at vastly higher interest rates than when those Treasuries were first issued. So, the old debt will be rolled over this year at about 4.2% to 5.5%, depending on the term. That’s troubling when most of the debt being rolled over was issued around 2%. They are doubling the cost to service that debt. As more of this old, cheap debt comes due and is reissued at higher rates, the cost of servicing the debt will grow exponentially. That additional expense adds to the deficit, and the vicious cycle feeds on itself.

What follows is an ugly pattern of the debt crises fueling accelerating inflation. As jobs dry up, the goods on store shelves skyrocket, followed by social unrest and increased centralization from the extreme left or right. This pattern is as old as history itself.

Look back to the Weimar Republic of Germany in the years following the First World War. Faced with budgetary deficits due to war reparations, the German government printed money wildly to meet its expenses. The result was hyperinflation. The runaway inflation caused the cost of a loaf of bread to rise from 3 Marks in 1922 to 80 billion Marks in November 1923. Prices were rising so fast that people hurried to spend their pay during lunch hour before it lost any more of its value. Foreign trade and the German ability to pay reparations became impossible, while personal savings were wiped out. Commercial dealings in Germany were replaced by barter, and food riots broke out. The drop in the value of their wages devastated the working class. This instability, coupled with the Depression a few years later, undermined the republic’s foundations, leading to the rise of Adolf Hitler.

Every day, we are getting closer to the point of no return. We know that we’re headed in the wrong direction, and if we stay on this path, we’ll go full Weimar, carrying our cash not in wallets but in wheelbarrows.

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When government is spending trillions...and again trillions.....and we are all...drawing goods and services out of the same economy.........

People eventually figure out...usually too late ....that we as American Citizens are competitors...against government excesses....government spending..government largess.

We are not citizens ...but competition for goods and services as we are all drawing out of the same economy.

Remember...government gets it without work and without Risk...and we must delay ....by work and risk taking....and government does not...do any of these things..but creates monies out of nothing...and then goes out into the same economy as do we...and buys up goods and services..and we live off what is left....

Understand now????


Eventuallly you become second, third, and fourth place Americans in your own country as government uses/misuses this money power to buy up more and more votes and influence.....but not to protect the public felicity..

Catching on yet???

We eventually have such dumb things going on like......the Ukraine is more important than we as Americans.

Understand now??????


This is what happens when you have Ishmaelites turning everything American upside down ....and trying to call it normal...and hiding this abnormality ... behind something called Woke.


Be Warned these Ishmaelites....whose specialty is a form of very sophisticated....bondage..


My non Ishmaelite .02,
Watcherchris

 

Me, I don't think America can be repaired at this juncture in history.

If this nation is to progress, it must first crumble.

To prepare a field for next year's crop, the farmer burns off his field and turns it over with a plow.

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Democratic Socialists, "Let Trump eat our horrific failures!"

Old Gzr: The following article should be read in its entirety. Good read. I've only quoted a few paragraphs (as usual).

My view: Not Trump, not anyone can keep this nation from going over the waterfall ahead. Listen, you can hear the roar of the cataclysmic cataract. "Forget Biden, let's dump it on Trump, then come back in 2028!" Problem is that come 2028, the USA may no longer exist.


"Why the Democrats are Throwing the Presidential Election"

05/31/2024 Douglas French

https://mises.org/power-market/why-democrats-are-throwing-presidential-election

Begin quote

I heard a rumor the other day that Democrats are throwing the Presidential election. Party apparatchiks believe the stock market will crash, sinking the economy and they would rather have it all implode on Donald Trump’s watch, paving the way for having a Democrat in the White House from 2028 until eternity.

This sort of conspiracy theory seemed spectacularly implausible until I read in the New York Times, that anti-Trump Republicans believe the Biden campaign is ghosting them. “Some Republicans blame the Biden campaign, saying they’ve heard practically nothing from an operation they think could use their help. And they worry that the omission represents a broader failure to bring moderate Republicans into the fold.”

Everything seems A-OK with the U.S. economy on the surface. But, the latest Grant’s Interest Rate Observer’s lead story, entitled “The case of the fragile 27%” uses the report by Paul Kupiec, a senior fellow at the American Enterprise Institute in Washington, D.C., to make the case that systemic risk to the nation’s banking system is bubbling just below the economy’s surface.

Kupiec has analyzed the banking system for decades. Grant’s summarizes the findings laid in his recent report, “the bear market in commercial real estate, the zero-percent-to-5%- plus moonshot in the federal funds rate and the high concentration of troubled CRE assets in too many bank portfolios have created ‘significant systemic risk.’”

“After incorporating unrecognized interest rate losses into the CRE loan concentration measure,” Kupiec reports, “the number of banks with market value– adjusted CRE concentration ratios above 3(times equity) swells to 2,916 institutions, including 19 banks with assets between $50 billion and $250 billion and 2 banks with assets greater than $250 billion.”

The 500 basis point jump in Fed funds rates has banks carrying a collective billions of dollars in unrealized losses. If bankers call their securities portfolio “held to maturity” which is years or decades away they can hold the securities at par. Everything looks good on paper and depositors are none the wiser.

But, Kupeic writes, “as of Dec. 31, 2023, there was but a single bank with a Tier-1 leverage ratio under 3%. In contrast, after adjusting banks’ reported Tier-1 capital balances for unrecognized interest rate–related losses in asset values, 1,036 banks have market value–adjusted Tier-1 leverage ratios at or under 3%, including 165 banks with negative Tier-1 capital on a marketvalue–adjusted basis. . . .The magnitude and prevalence of unrecognized interest rate losses create the potential for substantial losses for the FDIC’s deposit insurance fund should many of the banks with weak market value–adjusted Tier-1 leverage ratios fail as a consequence of CRE loan defaults.”

Not only does Kupeic’s analysis paint a dire picture for hundreds of the nation’s banks but makes the case that the FDIC (Federal Deposit Insurance Corporation) itself may not survive even a moderate commercial real estate meltdown. Some may remember another deposit insurer no longer with us, the FSLIC.

In his GnS Economics newsletter on substack TUOMAS MALINEN is also keeping an eye on the banks and using his stress test criteria, 96 banks are currently insolvent. That is 12 more than when he ran the bank numbers at the end of last year’s fourth quarter. In Malinen’s most likely scenario, he writes, “we are assuming higher loan losses than what manifested during the Great Financial Crisis. We assume steeper losses, because the situation is in many ways more worrisome than what it was, when the U.S. entered the GFC in 2008.”

The election seems to be about the border, abortion, and inflation. But, Black Swans are everywhere.

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"Data Analysis: More Banks at Risk of Failure as CRE Loans Reprice"

https://www.fau.edu/newsdesk/articles/commercial-real-estate-screener-banks-failure

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More than 60 of the largest banks in the country are at increased risk of failure due to their commercial real estate (CRE) exposures, according to a data analysis from a finance expert at Florida Atlantic University.

Sixty-seven banks have exposure to commercial real estate greater than 300% of their total equity, as reported in their first quarter 2024 regulatory data and shown by the U.S. Banks’ Exposure to Risk from Commercial Real Estate screener.

“This is a very serious development for our banking system as commercial real estate loans are repricing in a high interest-rate environment,” said Rebel Cole, Ph.D., Lynn Eminent Scholar Chaired Professor of Finance in FAU’s College of Business. “With commercial properties selling at serious discounts in the current market, banks eventually are going to be forced by regulators to write down those exposures.”

The U.S. Banks’ Exposure to Risk from Real Estate screener, a part of the Banking Initiative at Florida Atlantic University, measures the risk to exposure from commercial real estate at the 157 largest banks in the country with more than $10 billion in total assets. Using publicly available data released quarterly from the Federal Financial Institutions Examination Council Central Data Repository, Cole calculates each bank’s total CRE exposure as a percentage of the bank’s total equity. Bank regulators view any ratio over 300% as excess exposure to CRE, which puts the bank at greater risk of failure.

The banks of greatest concern are Flagstar Bank and Zion Bancorporation, according to the screener. Flagstar Bank reported $113 billion in assets with a total CRE of $51 billion. The bank, however, only had $9.3 billion in total equity, making its total CRE exposure 553% of its total equity.

Similarly, Zion Bancorp had a total CRE of 440% of its total equity; the bank reported $87 billion in assets and total CRE of $26 billion, but only $5.8 billion in total equity.

“These are the two largest banks with excessive exposure to commercial real estate,” Cole said. “Both rely heavily on uninsured deposits, which makes them vulnerable to a bank run similar to what forced regulators to close three large banks during spring 2023. Those bank closures have led to concerns about the stability of the U.S. banking system that persist to today.”

For comparison, the Q1 2024 industry-average benchmark for total CRE exposure was 139% of total equity.

Banks with less than $10 billion in total assets are facing similar risks due to their commercial real estate exposure. Among banks of any size, 1,871 have total CRE exposures greater than 300%, 1,112 have exposures greater than 400%, 551 have exposures greater than 500% and 243 have exposures greater than 600%.

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"Fearing Losses, Banks Are Quietly Dumping Real Estate Loans"

https://www.nytimes.com/2024/06/24/business/commercial-real-estate-loans.html

Begin quote

Some Wall Street banks, worried that landlords of vacant and struggling office buildings won’t be able to pay off their mortgages, have begun offloading their portfolios of commercial real estate loans hoping to cut their losses.

It’s an early but telling sign of the broader distress brewing in the commercial real estate market, which is hurting from the twin punches of high interest rates, which make it harder to refinance loans, and low occupancy rates for office buildings — an outcome of the pandemic.

In terms of both number and value, the troubled commercial loans that banks are trying to offload are a sliver of the roughly $2.5 trillion in commercial real estate loans held by all banks in the United States, according to S&P Global Market Intelligence.

But these steps indicate a grudging acceptance by some lenders that the banking industry’s strategy of “extend and pretend” is running out of steam, and that many property owners — especially owners of office buildings — are going to default on mortgages. That means big losses for lenders are inevitable and bank earnings will suffer.

Banks regularly “extend” the time that struggling property owners have to find rent-paying tenants for their half-empty office buildings, and “pretend” that the extensions will allow landlords to get their finances in order. Lenders also have avoided pushing property owners to renegotiate expiring loans, given today’s much higher interest rates.

But banks are acting in self-interest rather than out of pity for borrowers. Once a bank forecloses on a delinquent borrower, it faces the prospect that a theoretical loss could turn into a real loss. A similar thing happens when a bank sells a delinquent loan at a substantial discount to the balance owed. In the bank’s calculus, though, taking a loss now is still better than risking a deeper hit should the situation deteriorate in the future.

“The banks know they have too many loans on their books,” said Jay Neveloff, who heads the real estate legal practice at Kramer Levin.

Mr. Neveloff said banks were beginning to put out feelers to see what kind of discount would be necessary to entice investors to buy the worst of the batch. Mr. Neveloff said he was working on behalf of several family office buyers who had been approached directly by a few big banks with deals to buy discounted loans.

Right now, he said, banks are inclined to market deals privately so as not to draw too much attention and potentially frighten their own shareholders.

“The banks are going to a select number of brokers, saying, ‘I don’t want this public,’” Mr. Neveloff said.

Banks are also feeling pressure from regulators and their own investors to reduce their commercial real estate loan portfolios — especially in the wake of last year’s collapse of First Republic and Signature Bank. Both had been major commercial real estate lenders.

Michael Hamilton, one of the heads of the real estate practice at O’Melveny & Myers, said he had been involved with a number of deals in which banks were quietly giving borrowers a year to find a buyer for a property — even if it meant a building was sold at a substantial discount. He said that the banks were interested in avoiding a foreclosure and that borrowers benefited by getting to walk away from a mortgage without owing anything.

“What I have been seeing is the cockroaches are starting to come out,” said Mr. Hamilton. “The general public does not have a sense of the severity of the problem.”

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