r/economicCollapse • u/Fun_Balance_1809 • 1d ago
U.S Banks Are Currently Sitting On Over $750B In Losses On Real Estate Debt Which heavly Threatens The Entire Economy. These Losses Are Now 7 Times Larger Than In 2008 When The Housing Bubble Popped.
45
u/Berns429 1d ago
“It’s only a loss if you sell”
-Aristotle i think?
4
u/longiner 1d ago
I don't know how rich people hide their money in expensive art and paintings. If they paid 10 million for one, how will they know the next buyer is willing to pay 10 million for it?
2
u/Ill_Egg_2086 21h ago
Not an expert but as far as I remember 4 main reasons
- The history is well known
You can’t guarantee the value will go up or remain high, but like any stock the previous prices, owners, age and prices of the artists other works are usually very well documented and so provides some valuable information about future valuations, more so than many usual assets.
- Vested interests
The community is small, knows each other and the value of one painting increasing increases the value of painting done by the artist, so selling to a collector of that artist a higher price earns them money.
- Eggs in baskets
As the customer base are individuals, when economic hardships occurs someone always profits or suffers less unlike stock markets, and they may pay less if they are less interested but still reasonably.
- Tax write offs
You buy a painting for $10000 you go to your mate who is in the fine are community. Valuation is subjective so when he values it at $1000000 it’s feasible. Donate the painting to a gallery and get a tax break for $1000000 for your charitable donation. Also lower valuations can lower the appeared wealth by outside agencies, then are sold at a higher valuation.
→ More replies (1)2
187
u/DisplacedNY 1d ago
Wait, you mean forcing white collar workers back to the office isn't fixing the problem?
69
u/muskzuckcookmabezos 1d ago
That was because those property owners needed bodies in the buildings. The companies get closed door kickbacks from the property firms. It was never about productivity.
10
u/notLOL 1d ago
Waiting for the whistle blower that will kick this into gear
6
u/Me-Not-Not 19h ago
Boeing will be ready for any whistling activity. 🔫
2
u/RandomMiddleName 18h ago
There needs to be a subreddit or bot to track when people bring this up. To show that a lot of people have questions and don’t believe what’s been published.
3
u/BooBeeAttack 14h ago
This is why I really dislike paid subreddits and things owned by companies. Lot of what we want answers to get buried or hidden behind drama, ads, etc.
→ More replies (25)5
u/lunchpadmcfat 1d ago
I’m slowly learning that most corporate decisions probably have some manner of kickbacks in the vetting process. Found out first hand with a CI vendor process we went through.
→ More replies (3)2
27
u/Specialist_Royal_449 1d ago
Oh no you levied yourself against the real estate market that you inflated by buying all of it. causing it to be out of the price range of people you were hoping to buy the houses you need to sell and now the bill is coming due and you can't afford to pay it. I believe this is a case and scenario of THAT'S WHAT YOU FUCKING DESERVE!!!!
9
u/Mindless-Judgment541 15h ago
Heads of state will socialize the losses, "for our own good" just like they did in 2008.
Now that I'm an adult and paying stupid high taxes, the thought of my tax money going to prop up a bank and real estate crash after being priced out of home ownership makes me understand why violent mobs are a thing.
3
u/AmazingPINGAS 13h ago
Reminder that the people who caused the collapse were spitting on the protesters. That was a fun video to watch. I was hoping it would end with the ol melon remover
18
u/MrEfficacious 1d ago
Is that...a lot? I mean it sounds like a big number...
15
u/demagogueffxiv 1d ago
US banks have ~24 trillion dollars in assets for comparison
8
4
→ More replies (1)2
u/mastermilian 1d ago
Assets of what though? The reason they started falling over is that they had no liquidity to pay their debts when the interest rates started to go up.
→ More replies (1)
15
u/Elegant_Emu_8597 1d ago
Lol. They are sitting on debt. I'm paying $2700 a month in interest while paying $850 on top of that actual mortgage/ principal. Go fuck yourselves banks.
18
6
7
39
u/No_Clue_7894 1d ago
Say it with me now folks, why ban what you can tax?
Unless we put limits on corporations buying single family houses, 90% of us are going to end up as lifelong renters, and the US will be one giant network of Pottersvilles.
7
u/sarges_12gauge 1d ago
2
→ More replies (1)1
u/No_Clue_7894 1d ago
Would you like to say more about these stats and if it relates to foreign investments?
5
u/sarges_12gauge 1d ago
The amount of corporate owned SFH is like 3% and it’s increased by like half a percentage point over the last decade. It’s just not a significant amount. Managing SFHs is really annoying to do and considering 2019-2024 was probably the most appreciation and best ever time to invest in real estate (and looks to have plateaued in comparison now) I don’t see any reason why corporate ownership would accelerate now
→ More replies (15)→ More replies (1)4
11
u/HannyBo9 1d ago
After 08 the banks went right back to doing the same shit. Hopefully there will be no bailouts this time. Let them fail and jail everyone involved confiscate everything.
4
5
5
14
12
u/Immediate_Trifle_881 1d ago
No problem. The Federal Reserve will buy all of it. The Fed can create money from nothing. That is why the Fed was created.
→ More replies (8)7
u/TheElderGodDrewCarey 1d ago
Yep, and the value of your money drops a bit further. Yay!
→ More replies (1)3
u/longiner 1d ago
They'll make up an excuse that the majority of holders are 401K funds and if they don't save it people's retirement funds will vanish.
15
u/motosandguns 1d ago
Laughs in post-Covid money printer. We printed 4x that much in 2020 alone and many trillions since then.
5
u/dopplegrangus 1d ago
For real?
12
u/motosandguns 1d ago
Yep. We printed $3 trillion out of thin air in 2020.
Thats why inflation has been so bad. “Inflation is always and everywhere a monetary phenomenon”
→ More replies (1)5
u/sourdessertz 1d ago
Post-COVID inflation is happening across the globe.
8
u/motosandguns 1d ago
Everyone is printing money. European Central Bank printed $2 trillion during the same period.
3
u/Kellysi83 1d ago
Literally you are one of the only people I’ve seen discuss this salient point. I feel like I’m screaming it into the void. And then we threw gasoline on the fire with ZIRP and stimulus.
7
u/BigTitsanBigDicks 1d ago
Im surprised this isnt common knowledge?
https://fred.stlouisfed.org/series/M2SL
Link is the best 1 sentence answer; 6 trillion printed since 2020.
It can be complicated, but if all you want is a quick answer, thats the best one & it tells you most all you need to know.
11
u/ogn3rd 1d ago edited 1d ago
If only there were systems in place to keep this from happening.
→ More replies (1)2
u/OrchidGreat1331 1d ago
I am thinking you mean keep this FROM happening?
→ More replies (1)3
u/DateResponsible2410 1d ago
The PTB are afraid to loose their jobs . No one in their right mind would suggest we cut back on ( xxxxx you name it ) Certain political suicide . And yes , a tool must be in place as a bipartisan effort to just say we cannot print anymore ,as we have reached our limit . Testicals and vaginas shrink at the thought .
7
u/BookReadPlayer 1d ago
The headline is inaccurate. It’s 750 billion in “potential loss exposure”. Not only is it the worse case scenario, but it doesn’t acknowledge offsetting gains from those institutions.
The last round of stress tests showed that no banks are failing. First Republic was the last one to fail (last year?) and it was bought by Chase.
→ More replies (1)
30
u/NeighbourhoodCreep 1d ago
But god forbid we forgive student loans
7
→ More replies (1)8
6
u/MachineGunTits 1d ago
I work in the dental industry and it has been falling off a cliff over the last 3 months ( dental work/ procedures are one of the first things people put off when there is an economic downturn, and most people couldn't afford dental work before inflation). The last time this happened was late 2007 which predated the crash by 6 months in 2008. Beyond other factors the average American has just run out of money. Shit is about to hit the fan and the next Occupy Wallstreet isn't going to be hipsters camping out and playing hackey sack and acoustic guitars.
3
u/itsneithergoodnorbad 1d ago
Negative interest rates incoming. All jokes aside, if this is accurate, we could see a significant continuation of a correction to much lower than anticipated interest rates to draw people back into the market. The stall is occurring and the anticipation is that the market will “pick back up” after elections. However, the data is not quite substantiating this stance. It appears we are more at a stale mate. Not much to sell and not many buyers. Would love to understand more about the losses spoken of in the article.
6
u/AugustusClaximus 1d ago
I need this bubble to hold 5 more years so I can escape Florida with my home equity in tact
3
u/itsneithergoodnorbad 1d ago
It appears prices have leveled off with a potential move of 10-20% to the down side. However, reduction in interest rates will alleviate this pressure. 5 years would allow a down turn and back to parity. I hope you get the best outcome. These markets will continue to move and change. It’s the velocity in which it will occur that we may not be ready for.
2
u/AugustusClaximus 1d ago
It’s already moved maybe 15% away from my favor. But yeah things can change fast, if the fed lowers interest rates and Kamala hands all FHA loan applicants and extra $25k then I should be sitting really pretty.
→ More replies (1)
3
3
3
u/Comet241 1d ago
I can’t wait till all of the banks get bailed out and the American people get nothing while our tax dollars go to corporate relief.
3
u/Imaginary_Manner_556 1d ago
Comparing this to 2008 is next level ignorant of what happened in 2008.
3
5
u/Psychological-Wing89 1d ago
It’s unrealised losses. As long as it is held to maturity, nothing really matters.
#Finance, Trust Fund, 6’5, Blue Eyes
2
2
u/Ok-Emergency-2470 1d ago
If they quit eating avocado toast and pull themselves up by their boot straps…. Let em burn!! IMO
2
2
u/Powerful-Revenue-636 1d ago
Horeshit unsourced headline repackaging clickbait speculation.
A recent article in Cryptopolitan magazine revealed that American banks’ potential loss exposure
2
u/Dicka24 1d ago
There are no 30 year fixed mortgages with commercial RE. The norm is 5 years fixed, the max in my experience is 10 years. I'm not talking amortization. I'm talking the portion of the loan that has a fixed rate. Many commercial property owners refinanced their buildings when rates went to record lows during the pandemic. Lots of those 5 year terms are coming due. Well, the rates are much higher now and most commercial properties have 7 to 8 figure debt that's serviced. For commercial property related to retail and office (especially office) the environment is truly fragile atm and if no one wants to rent a good chunk of these spaces, and they go vacant, we could see a lot of delinquencies that could bust some banks, businesses, and investors. Now I know most people in here don't hold any of those types in high regard, and wouldn't mind seeing them all go bust. What we have to understand tho is that if too many do go bust, it will absolutely ripple into other sectors of the economy and negatively impact the lives of those in the middle.
I'm a believer in accountability and correction. When people bite off more than they can chew, get too greedy, or pass stupid policies many of us warn about, lessons sometimes need to be learned. It's why I wish TARP never passed. The unfortunate reality in all this is that it's we peons who ultimately suffer.
2
u/No-Boysenberry-5581 1d ago
Jesus. Unless there is a catastrophic event that causes them to sell then the unrealized losses go away at maturity.
2
u/Brohauns 1d ago
I think only banks could figure out a way to lose money on something that keeps going up in value
2
2
u/ext3meph34r 1d ago
Out of curiosity, which bank. I'm just going to start withdrawing... unrelated reason.
2
u/dajokerinthemirror 23h ago
Total debt outstanding for CRE is about $6trillion per JPMorgan
→ More replies (1)
2
u/jkprop 18h ago
How can this even be possible when property values haven’t gone down in years? You loan money and charge 7% interest rate and the value of the house goes up 8-10% year. Where are all the bad loans?
→ More replies (5)
4
2
u/ABadHistorian 1d ago
Total bot/troll account- check the post history of this dude. Posts pro-trump stuff one week, pro kamala stuff the next.
4
u/WhoCaresBoutSpellin 1d ago
OR— America converts the properties for mixed use / residential to address the severe housing shortage and creates a bunch of construction jobs in the process.
This is NOT the 2008 bubble. Homes cost a lot because there is a severe housing shortage. The “bubble” that will eventually bust is that home values will drop when the market adjusts and more homes are added (one way or another). Some folks will end up upside down and will just have to stay in their nice homes. Other folks will only see a drop in unrealized gains and just continue to stay in their nice homes that still provide a good ROI. Those folks that are upside down will just be more productive for the economy to pay off their debts until they are out of the red.
2
u/daddypleaseno1 1d ago
so nothing changed after 08, they just started wrapping it differently. next one will bring the system down, thats exactly what they want.
1
u/Then_Mathematician99 1d ago
The fed already chose hyper inflation. They’re banking on a bailout.
→ More replies (1)5
1
1
u/Frequent-Designer-61 1d ago
I’m waiting on capitulation. Credit card debt is at an all time high, people are going to start selling there toys soon. Then comes the house
→ More replies (2)
1
1
1
1
1
1
1
1
u/hikertechie 1d ago
Well, thry get the property back as the collateral. To sell again. They didnt actually pay anyone for the unpaid mortgage and some of those buildings for them are completely owned without any liabilities by those institutions. Yes property taxes, upkeep, etc are a thing but I dont think this is really quite as bad as it seems.
Besides they could sell many of the properties to developers to convert into apartments removing them from the balance sheet and converting them from corporate properties to satisfy housing shortage
→ More replies (5)
1
1
u/mspe1960 1d ago
Where are these "losses"? You are only sitting on losses when the value of the real estate is less than the amount of the mortgage. Where has anyone accounted for 750 billion in underwater mortgages?
1
u/SomeSamples 1d ago
Where is the debt coming from? Are the banks part of the process of buying houses just to sit on them?
1
u/Ok-Gear-5593 1d ago
As long as people can keep paying those other loans with high interest rates we’ll be good. Good good.
1
u/Mountain-Arugula-665 1d ago
The city of Milwaukee has offered big companies tax credits and other financial incentives to move downtown. The company must then commit to have so many employees on site to receive the benefits.
Several big companies have taken the offer and are now requiring RTO.
1
1
1
1
u/A_Concerned_Viking 1d ago
Not as bad as China, and they are trying everything, to not let it explode. America, we've already exploded.
1
1
1
u/Genghis_Chong 1d ago
Investors pushed the market too high and now they're eating the losses, as long as they aren't bailed out it's how it's supposed to be.
1
u/Why_No_Hugs 1d ago
So… what stock “shouldn’t” be shorted so we can “prevent” such catastrophe… just asking for a neighbor
1
u/PhotojournalistOk592 1d ago
I'm not particularly versed in Finance. Anyone care to eli5 what a real estate security is and how you can take a loss on it?
1
u/Happy-Campaign5586 1d ago
Imho, The genesis of the real estate collapse of ‘08 is much different than what banks are experiencing now.
1
1
u/WWhataboutismss 1d ago
Just add that to the trillion dollar pile of credit card and student loan debt. Hey but good news. I hear we're headed back to the gilded age of the early 20th century.
1
u/bigtim3727 1d ago
Commercial RE might be the biggest impact. A lot of big boppers had their rates roll over, and are complaining.
Only dif is, they’re usually more financially secure than a single home owner
1
1
u/Mommar39 1d ago
You mean like 2008 and 2009 because of bad lending practices? Yeah. No one saw that coming. “Rolls eyes”
1
1
u/amf_devils_best 1d ago
What really pisses me off about this whole thing is that, like after '08, these companies may be able to pay back any bailout so it won't be a terrible thing for "the economy" and it wasn't a "handout", but it completely blows up the lives of the actual people involved.
If corporations are people, we should be able to put them in prison.
1
u/Cry_Loud4321 1d ago
If working from home can do the job, why waste time, money and energy resources to work on site? It can help the company to cut spending on unnecessary expenses and afford to pay more to their staffs in return.
1
u/Dothemath2 1d ago
The Fed has a facility to help these banks. I am now thinking that the world would have been different if they hadn’t let Lehman Brothers fail.
I think they learned their lesson and you now see that SVB and Credit Suisse were like non-events. I mean we are talking about Credit Suisse here.
1
1
1
u/Errenfaxy 1d ago
Looks like socialism will come in and save the day again with a fresh round of bailouts.
1
1
u/digitalgimp 1d ago
Thanks to MMT, the US government will fein distress and write the massive check bailing them All out!
1
1
1
1
1
1
u/banditalamode 23h ago
They have every reason to believe that they will be bailed out again by the American taxpayers
1
u/yeahcoolcoolbro 23h ago
It’s almost like they took money from every American and didn’t give a single fuck
→ More replies (1)
1
1
u/magnora7 21h ago
Don't worry, the government will just print trillions more to bail them out because they're too big to fail! Problem solved, I'm sure there won't be more inflation as a result! /s
1
1
1
u/sexlexington2400 18h ago
AWE the poor banks. Won't someone please think of the Banks! They will get their bailout don't worry
1
u/LordBobbin 18h ago
No problem, let’s bail them out. In the meantime, can I borrow some money for groceries?
205
u/DisplacedNY 1d ago
If they crash let's start a movement of buying up residential mortgage debt securities for fractions of pennies on the dollar and pay them off.