Why Hundreds Of U.S. Banks Are At Risk Of Failing

Across the U.S., hundreds of small and regional banks are feeling stressed and may be at risk of failure. Of about 4,000 U.S. banks analyzed by the Klaros Group, 282 banks face stress from commercial real estate exposure and potential losses tied to higher interest rates. Most banks facing risks are categorized as small, or community, banks. Though the risk is less systemic compared to the Big Banks, community and regional banks are an important source of credit to local businesses and governments. “There’s no doubt in my mind there’s going to be more bank failures,” former chair of the U.S. Federal Deposit Insurance Corporation Sheila Bair told CNBC. Watch the video to learn more about the risk of commercial real estate, the role of interest rates on bank balance sheets and what it may take to relieve stress on banks — from regulation to mergers and acquisitions.

Chapters:
1:40 Chapter 1 - Stressed banks
4:56 Chapter 2 - Commercial real estate
6:21 Chapter 3 - ‘Unrealized’ losses
7:51 Chapter 4 - Rescuing banks
9:58 Chapter 5 - Regulation
11:57 Chapter 6 - Bank failures

Produced and Edited by: Andrea Miller
Reporting by: Hugh Son
Animation: Christina Locopo
Supervising Producer: Lindsey Jacobson
Additional Footage: Getty Images

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Why Hundreds Of U.S. Banks Are At Risk Of Failing

[tommychestnut]

Our economy struggling with uncertainties, housing issues, foreclosures, global fluctuations, and pandemic aftermath, causing instability. Rising inflation, sluggish growth, and trade disruptions need urgent attention from all sectors to restore stability and stimulate growth.

[GillerHeston]

Really, banks require more regulation. The entire idea of banking as "let's gamble" is terrifying. Because they discovered in 2008 that the government will always bail them out, there are no repercussions. These bank crisis are so worrisome. This whole financial crisis and the Great Recession posed the most significant macroeconomic challenges for the United States in a half-century, leaving behind high unemployment and below-target inflation and calling for highly accommodative monetary policies. And this is only the beginning!

[Aron-rm]

The fin-Market;s have underperformed the U.S. economy as fear of inflation hammers the prices of stock;s and bonds. My portfoliio of $750k is down to $592k any recommendation;s to scale up my return;s during this crash will be highly appreciated.

[SeanTalkoff]

The bank crisis isn't over yet, and experienced individuals know credit crises don't end quickly. Some find it amusing that some think it's resolved, but in reality, we're headed for a major economic downturn due to this credit contraction.

[sarawilliam]

Sadly, banks continue to stumble, mortgage rates is on the rise with higher imports and lower exports, yet the FED is to lessen cost. So, where do we grow and safeguard our money now? something will eventually break if they keep raising interests and quantitative tightening.

[mayalucia-]

Big government spending on sweetners and unicorns = higher taxes = higher inflation = government subsides to quell inflation, The rising interest rate can surely control inflation, but won't prevent erosion of the eroding purchasing power of the US dollar. I have learnt my lesson this time. The banks can't be making money off my money, while inflation eats into it. I have set aside 650k to invest in the stock market now, since that keeps up with inflation, but I don't know how to get started.

[NicholasBall]

It's quite simple why rates are climbing with rising imports and falling exports, the FED is obviously to be blamed for banking crisis. Something will eventually break if they keep the quantitative tightening and higher interest rates. Is this really a good time to have some savings in stocks?

[LaurenFeller-dduf]

There seems to be skepticism amongst investors regarding the Federal Reserve's plan to continue increasing interest rates until inflation is stabilized. As for myself, I find myself at a crossroads, uncertain whether to invest $150, 000 into my stock portfolio. I'm seeking advice on the best strategy to capitalize on this current market.

[JanineJ.Cromwell]

I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.

[lppoqql]

One red flag is when banks start to cut their risk management units during end of cycle. Thats like firing your fire fighters just before a forest fire.

[AlanSmith]

The bigger megabanks like JP Morgan will just swallow them up.

That was the plan all along.

[gabediaz]

It's almost as if the push for continous YoY growth and pushing consumers to increase their spending isn't sustainable.

[mountainvalleymedia]

Hey! I remember this one! we had one of these in 2008
That worked out great in the end (for the banks)

[dannywalters]

By understanding how cash and banks work, it becomes clearer why they must ultimately fail. Ever heard the saying cash is thrash? Just hold your money in more stable and lucrative ways and save yourself the eventual stress and heartbreak.

[Brownyman]

Moral Hazard - When people know they are insulated from the consequences of their mistakes they tend to keep making them.

[marcuscook]

If you've ever wanted to know what a massive debt bubble looks like, this is it. So many things are about to break simply from a return to historically normal interest rates. In a healthy economy where everyone can actually afford what they're buying, 5.5% interest shouldn't break you. The reality is, consumers and institutions are stretched to their limit and went on an excessive debt binge after years of net negative interest rates. In the first quarter of this year, we saw GDP growth decline while inflation was still on the rise despite this and household incomes not changing significantly. Meanwhile consumer debt and credit card balances have exploded so far this year. This almost certainly means price increases and what little economic growth we have (1.6%) are being fueled by debt, which is completely unsustainable and an ominous sign for the economy.

[Jimmyrey]

I saw someone call this 5 years ago. The community banks give loans to small business in the community. JP Morgan and the big banks only care and give loans to mega corporations. The failing of community banks is a consolidation of power and bad for the country and everyday person

[Beatricegove]

It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007–2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with these banks is only the beginning of what will happen if nothing is done to address the current situation.

[bpexodus]

Here comes "Too Big To Fail" Part 2

[smithlenn]

What happened to SVB is really scary, and goes to show that no corporation, however big, is immune to collapse. I have always had a deep-seated mistrust for corporations. I have plans to pull out most of my money, but don't know what to do with $350k sitting idly.