It is also the BANKS that made these commercial real estate loans. Typically they are interest only with a balloon payment at the end. If the interest rate goes up and the occupancy rate is down the math just does not work. It means the BANK ends up owning a 50 story office building in NYC, San Fran, Cleveland, Chicago, etc.
Yes. Since I work in banking I can tell you its mostly local and regional banks which made these loans. Commercial Real Estate was considered to be the gold standard in terms of reliable returns even if they weren’t the highest rates of return. Everything has been upended obviously. Several local and regional banks are going to end up insolvent when the scale of the losses is revealed as long term corporate leases run out on many of these buildings.
That’s unfortunate. I wish it were Chase and BofA and Citi, etc taking it in the shorts instead of the small and medium sized banks but..........
After SVB failure ,3/2023 federal reserve creates “Bank term funding program” effectively nationalizing the banks
https://www.swfinstitute.org/news/100795/behind-the-scenes-banks-are-tapping-the-bank-term-funding-program
There should never be another bank failure