Even if the banking crisis isn\u0027t as bad as 2008 it could still spark recession and a credit crunch, says David Rosenberg. Read more
Keep in mind one thing, we know the story about uninsured deposit concentration, but we don’t know about the quality of the assets on the balance sheets, especially with delinquency rates having already been on the rise, albeit from low levels, even before the cash-flow squeeze from the recession has started. That’s the next chapter of the story, as it shifts from bank liabilities to bank assets.
Ben Bernanke cleverly threaded the needle in the summer of 2008 by not tightening into the last leg of the commodity boom-induced inflation bulge, warding off all the Federal Open Market Committee hawks at the time by sounding tough in the press statement, but doing nothing . Even prior to this current round of turbulence, the Fed senior loan officer survey showed that a net 61.1 per cent of banks had been tightening their credit guidelines in CRE loans compared to a net 16 per cent that were easing their standards a year ago. That is a massive shift.
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