By Michael Snyder
The Economic Collapse
In comments that he made after the deal was consummated, JPMorgan Chase CEO Jamie Dimon boldly declared that “this part of the crisis is over”…
“There are only so many banks that were offsides this way,” Dimon told analysts in a call shortly after the deal was announced.
“There may be another smaller one, but this pretty much resolves them all,” Dimon said. “This part of the crisis is over.”
And the U.S. Treasury is telling us that the U.S. banking system “remains sound and resilient”…
‘The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfil its essential function of providing credit to businesses and families,’ a Treasury spokesperson said.
Does reading that make you feel better?
They always offer such platitudes before things start getting really bad.
As I noted at the beginning of this article, the three banks that have collapsed so far this year were collectively bigger than all of the banks that collapsed in 2008 combined…
The three banks held a combined total of $532 billion in assets, which – according to the New York Times and when adjusted for inflation – is more than the $526 billion held by all the US banks that collapsed in 2008 at the peak of the financial crisis.
We are only one-third of the way through 2023.
And as Charlie Munger recently observed, many of our banks are absolutely packed with “bad loans” right now…
Charlie Munger believes there is trouble ahead for the U.S. commercial property market.
The 99-year-old investor told the Financial Times that U.S. banks are packed with “bad loans” that will be vulnerable as “bad times come” and property prices fall.
He is quite correct.
In particular, the collapse of commercial real estate prices threatens to create a massive tsunami of defaults…
Berkshire Hathaway, where Munger serves as vice chairman, has largely stayed on the fringe of the crisis despite its history of supporting American banks through times of turmoil. Munger, who is also Warren Buffett’s longtime investment partner, suggested that Berkshire’s restraint is partially due to risks that could emerge from banks’ numerous commercial property loans.
“A lot of real estate isn’t so good anymore,” Munger said. “We have a lot of troubled office buildings, a lot of troubled shopping centers, a lot of troubled other properties. There’s a lot of agony out there.”
As I keep telling my readers, we really are on the verge of the largest commercial real estate crash in all of U.S. history.
And as mountains of commercial real estate loans go bad, a lot more banks will start to go under.
The “too big to fail” banks will scoop up those that they like, while others are simply liquidated and go out of existence.
Ultimately, I believe that we are going to see a wave of consolidation in the banking industry like we never have before.
We are still only in the very early chapters of this crisis. Much worse is yet to come.
It is going to take a while for all the dominoes to fall, but each time another one tumbles over it will be a sign that the clock is ticking and that time is running out for the U.S. financial system.