May 2, 2023
Only one day after Jamie Dimon’s bank JPM swallows the good pieces of FRC with the help of a $30 Billion loan from the Federal Reserve, the market gets spooked by concerns that the debt ceiling may be reached in early June.
Jamie Dimon says that with this step, “…this part of the (banking) crisis, is over.”
On the other hand, this past weekend, Charlie Munger, Warren Buffett’s “senior” partner, says he sees big concerns for banks as commercial mortgage values collapse, and banks are stuck with an increasing number of defaulting “non-recourse” mortgages.
A non-recourse mortgage is one where the lending bank, can only look for the value of the building to repay a defaulting mortgage. The borrower, can walk away from the loan without any other consequence except the loss of any investment made when the property was purchased.
So a billionaire borrower can walk away from a mortgage default leaving the Bank with a big problem.
Rumors continue to fly about other banks that could start to experience problems retaining depositers. Some banks that are rumored to be at risk are: HBAN, KEY, CMA, TFC, and ZION.
Of course, I am not qualified to access the accuracy of these concerns, so you need to do your own research, together with your own financial advisors.
Again, I remain cautious, and like Warren Buffett and Charlie Munger believe it is wise to keep a good deal of your money in short term Treasury Bills. Not money market funds, but in Short Term Treasury Bills which are guaranteed by the Full Faith and Credit of the U.S. Government.
THESE POSTS ARE FOR EDUCATIONAL PURPOSES ONLY AND ARE NOT INVESTMENT ADVICE.