Savings You Need, The Fed is Confused and Private Equity Booming

Deposit runs have led to the collapse of three U.S. banks this year, but another concern is building on the horizon. According to JPMorgan Chase CEO Jamie Dimon, commercial real estate is the area most likely to cause problems for lenders. U.S. banks have experienced historically low loan defaults over the last few years due to low interest rates and the flood of stimulus money unleashed during the Covid-19 pandemic. However, the Federal Reserve has hiked rates to fight inflation, which has changed the landscape. Commercial buildings in some markets, including tech-centric San Francisco, may take a hit as remote workers are reluctant to return to offices.

In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.

They discuss an academic paper from economist Olivier Blanchard and former Federal Reserve Chair Ben Bernanke, who guided the central bank and the U.S. economy through the Great Recession, in which they argue that central bankers still have work to do to bring down inflation.

Chris and Saied look at news that San Francisco has the largest sublease market of any U.S. metropolitan area, with 7.2% of its overall office inventory available for sublease, having doubled that figure since late 2019.

They also offer some thoughts on the rise of asset managers, private equity funds and insurers, as the regional banking crisis supercharges the expansion of these non-bank lenders into areas such as providing consumer car loans and mortgages, or financing the construction of buildings.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

Why the debt ceiling 'crisis' is a non-event.
Private equity and how it differs from real estate syndicators.
Special Purpose Acquisition Companies (SPACs): a new way to take companies public.
And so much more...

Resources:

"Here's how much emergency savings you need amid economic uncertainty, according to financial advisors" (CNBC via Instagram)

"Fed Chair Powell says rates may not have to rise as much as expected to curb inflation" (CNBC)

"Jamie Dimon warns souring commercial real estate loans could threaten some banks" (CNBC)

"Analysis: Private equity steps up lending as U.S. banks pull back" (Reuters)

"Former Fed Chair Ben Bernanke says there’s more work ahead to control inflation" (CNBC)

"What's the right emergency fund amount?" (Vanguard)

"These Companies Are Trying To Shed Massive Amounts of San Francisco Office Space" (SF Standard)

"The Majority of U.S. Businesses Have Fewer Than Five Employees" (Census.gov)

"PacWest to Sell $2.6 Billion Real Estate Loans at Discount" (Bloomberg)

"Fed Rate Increases Hit Small Businesses the Hardest" (The Wall Street Journal)

"Regional Banks Rallied Last Week. Traders Continued to Short the Sector" (Bloomberg)