The Banking 'Issue'

 The simple nature of this banking 'problem'?

Well....you have a bank that thought commercial real estate....from hotels to malls...could be built, developed and operated...paying back the bank for its involvement in acceptable risk.  

So Covid came along, and whatever strategy existed for office buildings, theaters, hotels, stores, or even bank buildings themselves....could not focus and carry on....paying the bank loan back.

The bank's problem?  Well...it was now stuck with a structure of a present value (say $10-million) when the bank loan from 2018 (20 years) was for $60-million.  Selling it for faked-up value?  Now impossible.

Then you add the car problem....where people were convinced that a $80k car was reasonable, and over eight years of your stable job situation....you could pay the loan back.  Well....that strategy also went south.

The bank recovers the $80k 2-year old car, which probably is worth $45k max at present, but the loan money missing is $12,000.  The used car market presently?  That's also part of the story....so the car probably won't sell for more than $40k.

Credit card also in the mix?  Yes.    Some folks stand there with $20,000 in debt, and can't make the minimum of $1,000 a month.  

Home loans?  Same story.

Cities with loans?  If you had 40-odd businesses shut down over the past year.....you probably aren't making as much on property tax or sales tax.  

Did we have this type of mess in 1929?   No.  That bank failure era was mostly due to mismanagement of the vault contents.....with the bank books and the contents not being equal.  

FDIC having the assets to cover this?  No. 

What I tend to expect?  Three things:

1.  I expect some rushed-up meetings with the Fed and the White House....probably by early July.  The Fed will quietly admit a minimum of 20 bank failures to arrive by the conclusion of July.

2.  I expect the full point lessen on the prime rate.....to simply speed things up on the collapse.

3.  At some point in mid-July, I expect a Monday night live speech by the President to reassure the public. 

4.  Shortly after the speech....I expect gold and Bit-Coin to jump in a massive way.  At this point, more than 40-million Americans will attempt to remove cash from their accounts....ONLY to find that there is a cash-limit of $250 per day, and $750 per week.

5.  I expect by mid-August....more than half the banks in the US are under some type of review and reorganization.  

By this point, President Biden will admit that there is a limit to what can be done, and that Treasury notes apparently can't be marketed now.....because consumers don't consider them to be trusted.

Trying to scare people?  No....just reviewing 1929 history, and things appear in some similar nature.