LEIBOVIT VR NEWSLETTERS – WEDNESDAY – MAY 10, 2023

Brace yourselves, the banking crisis is just getting started – Yahoo! Finance

By Ben Marlow

If Jamie Dimon was pondering a career change as a fortune-teller, he’d be wise to stick to the day job. On the other hand, if someone of Dimon’s stature could be so wrong about the banking turmoil that continues to sweep across the US, a cynic might ask whether he was still the right person to be running one of the world’s largest financial institutions, particularly when that organisation is right at the centre of Government-led efforts to prop up the whole system.

Having ridden to the rescue of California lender First Republic over the weekend, JP Morgan’s superstar boss had a message for financial markets: its shotgun takeover of First Republic heralded the end of the crisis. He should know better than to be drawn into the realms of speculation about things he has no control of but then Wall Street is so deferential to figures like Dimon that they start to believe they can walk on water.

Still, the speed with which Dimon’s words have come back to haunt him comes as a shock. A mere 48 hours later, and it looked as though the game was up for yet another regional American bank – the fourth since the end of March.

“It’s Spooky”: Stanford Professor Warns Thousands Of US Banks Are “Potentially Insolvent”

Following the collapse of First Republic last week, the meltdown of three other banks, and the Federal Reserve’s quarter-point increase,
making the tenth straight hike in an aggressive campaign to tame elevated inflation, a professor of finance at the Stanford Graduate
School of Business presented a grim warning that the regional banking dominos are falling.

In a New York Times opinion piece titled “Yes, You Should Be Worried About a Potential Bank Crisis. Here’s Why,” Professor Amit Seru
wrote, “the fragility and collapse of several high-profile banks are most likely not an isolated phenomenon.” He said, “A damaging
combination of fast-rising interest rates, major changes in work patterns, and the potential of a recession could prompt a credit crunch
not seen since the 2008 financial crisis.”

Just in the past few months, Silicon Valley Bank, Signature Bank and First Republic Bank have failed. Their combined assets surpassed
those held by the 25 banks (when adjusted for inflation) that collapsed at the height of the financial crisis. While some experts and
policymakers believe that the resolution of First Republic Bank on Monday indicates the turbulence in the industry is coming to an end, I
believe this may be premature. On Thursday, shares of PacWest and Western Alliance are falling as investors’ fears spread. Adverse
conditions have significantly weakened the ability of many banks to withstand another credit shock — and it’s clear that a big one may
already be on its way.

Rapidly rising interest rates create perilous conditions for banks because of a basic principle: The longer the duration of an
investment, the more sensitive it is to changes in interest rates. When interest rates rise, the assets that banks hold to generate a
return on their investment fall in value. And because the banks’ liabilities — like its deposits, which customers can withdraw at any
time — usually are shorter in duration, they fall by less. Thus, increases in interest rates can deplete a bank’s equity and risk leaving
it with more liabilities than assets. So it’s no surprise that the US banking system’s market value of assets is around $2 trillion lower
than suggested by their book value. When the entire set of approximately 4,800 banks in the United States is examined, the decline in the
value of equity is most prominent for midsize and smaller banks, reflecting their heavier bets on long-term assets.

Since monetary tightening works in long lags (9-12 months), many of the rate hikes over the last year have yet to filter through the real
economy. In the coming quarters, the US banking system will face its toughest challenge yet, as tightening lending standards might spark
more breaking.

In Seru’s NYTimes op-ed piece, he noted, “There’s another looming area of concern that could spark such panic: The commercial real estate
sector.”

Commercial real estate loans, worth $2.7 trillion in the United States, make up around a quarter of an average bank’s assets. Many of
these loans are coming due in the next few years, and refinancing them at higher rates naturally increases the risk of default. Rising
interest rates also depress the value of commercial properties, especially those with long-term leases and limited rent escalation
clauses, which also increases the likelihood of owner default. In the Great Recession, for example, default rates rose to about 9
percent, up from around 1 percent, as interest rates rose.

For Zerohedge readers, the dual crises affecting regional banks and the commercial real estate sector (offices) isn’t a new thesis. We
first proposed the coming turmoil on Mar. 21 in a note titled “”Nowhere To Hide In CMBS”: CRE Nuke Goes Off With Small Banks Accounting
For 70% Of Commercial Real Estate Loans”. We’ve documented the unfolding crisis spreading from regional banks to the CRE space in
numerous pieces (many of which can be found in our premium section).

Our latest note, featuring BofA strategist Michael Hartnett highlights that “every Fed tightening cycle ends in crisis”, in this case US
regional banks.

Finally, the apocalyptic warning about the US banking system comes as JPMorgan CEO Jamie Dimon claims that “the system is very, very
sound.”

https://www.zerohedge.com/markets/its-spooky-stanford-professor-warns-thousands-us-banks-are-insolvent?
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BIDEN HAS TO GO BUT WILL VOTER FRAUD PREVENT IT?

It’s official. President Joe Biden is running for re-election and taking Vice President Kamala Harris along with him.

In only two years at the White House, Biden has caused enormous damage to the country, threatened U.S. national security and weakened
America throughout the world with his disastrous foreign policy.

In his re-election video, Biden claims he’s standing up for the freedoms of Americans. Reality and Biden’s actions tell a different
story.

Biden has repeatedly targeted political opponents with the full force of the federal government and violated the fundamental rights of
Americans. He’s destroyed the economy with sky-high inflation, implemented Marxist policies in the mortgage system (which will lead to
another housing crisis) and forced hardworking Americans to pay off the student debt of wealthy degree holders. He’s made it a habit of
tearing down fundamental American values about hard work and personal responsibility. All of this while partnering with his son Hunter to
sell out the country to foreign adversaries.

Biden talks about freedom, yet he’s targeting your Second Amendment rights with calls for gun bans and by signing executive orders.
Government bureaucrats, with his endorsement, have violated the First Amendment through Big Tech censorship. Not to mention his efforts
to fire thousands of Americans after they said no thank you to an ineffective vaccine.

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