“What have I become
My sweetest friend
Everyone I know goes away
In the end
And you could have it all
My empire of dirt
I will let you down
I will make you hurt”
~ Johnny Cash, Hurt
Written by Bryan Lutz, Editor at Dollarcollapse.com:
What has America become?
Everyone seems to want it all and what’s left is the junk.
Banks have been suffering losses over the past year and a half from commercial real estate delinquencies. In response many are setting aside reserves to make up for their losses.
Losses on bad loans.
Someone has to pay for bad loans, which means the bank has to divert funds from other, more profitable loans to service their debts.
In most cases, the odds of profitability, growth, and a healthy return to shareholders has become even less probable.
You can see this in New York Community Bank.
Commercial real estate’s latest victim.
Bloomberg reports:
NYCB Downgraded to Junk by Fitch, as Moody’s Goes Even Deeper
“New York Community Bancorp’s credit grade was cut to junk by Fitch Ratings, and Moody’s Investors Service lowered its rating even further, a day after the commercial real estate lender said it discovered “material weaknesses” in how it tracks loan risks.
Fitch downgraded the bank’s long-term issuer default rating to BB+, one level below investment grade, from BBB-, according to a statement Friday. Moody’s, which cut the bank to junk last month, lowered its issuer rating to B3 from Ba2.”
And that means, competition between Wall Street and Private Lenders is heating up.
Instead of a private lenders issuing loans or handing out cash in exchange for equity in a private or public company in distress, banks now want in on the action.
They need income.
So, it’s now a fight for the dirt…
Bloomberg reports:
Moody’s Says Private Credit Returns Will Be Pressured by Banks
“Private credit’s “golden era” may face strain amid a resurgence in the broadly syndicated loan market, as increased competition drives down returns, according to a report from Moody’s Investors Service…
…“As rate hikes level and competition escalates, this will put pressure on private credit returns, including the generous illiquidity premiums that direct lenders wield over syndicated lenders in public markets. All of this will drive greater convergence in terms and pricing between banks and nonbanks,” analysts led by Christina Padgett wrote in the report.”
The report is right about convergence.
As more loans are re-organized, re-financed, and re-allocated, unpayable debt will pile up.
The empire of dirt will become one great massive pile…
How long will it be before Wall Street’s Big Bankers, and the Private Lending Tycoons realize it was only ever dirt to begin with?
