Name:   MartiniMan - Subject:   I smell another 2008 in the air Date:   4/25/2023 8:26:38 AM

Time will tell but this is a far different cause but the results will be the same or worse.  Several things at work here that were not at play in 2008 that could make things worse. 

One is the collapse of the commercial real estate office market as a result of the pandemic and the resultant resistance to return to the office.  Already lots of open space (~13%) and much more to come when tenants don't renew their leases.  When the time comes to refinance it is going to be ugly for the developers and their current bank.  You're looking at a double whammy, less rental income and higher interest rates.  They are going to have trouble refinancing and all of them are in LLCs that they will take into bankruptcy (unless there are personal guarantees but the big boys don't do that).

Second, banks have long-term bonds that are paying almost nothing in terms of interest and the presure is on for them to pay higher interest on customer savings accounts. And given the reduction in bond values due to higher rates they don't have the option of cashing them in to bolster their balance sheets as they will incur a loss.  This is what doomed SVB or whatever it was called.

Third, if we go into recession it will do all the usual damage to the banking sector.  More mortgage defaults.  Less savings.  Higher credit card debt and subsequent defaults and so on.  Not to mention the specter of runs on banks which will be an end to them in a heartbeat.