U.S. Financial Institutions Considering $2,500,000,000,000 in Market Exposure Before “Inevitable Losses” Hit Their Balance Sheets

According to a recent report, several of the nation’s largest financial institutions are discreetly liquidating their investments in a financially distressed sector of the United States economy.

The New York Times reports that the banks are beginning to dispose of commercial real estate loans in an effort to “minimize their losses.”

Goldman Sachs and Citigroup, which recently sold portions of a troubled $1.7 billion loan secured by office buildings in New York, San Francisco, and Boston, are the primary examples cited by The Times.

Additionally, Capital One has divested itself of a $1 billion portfolio that comprised a substantial number of commercial loans in New York.

The apparent shift in tone is remarkable, despite the fact that the value of the loans being sold by the lenders is negligible in comparison to the $2.5 trillion in commercial real estate loans owned by all US banks.

“These actions suggest that certain lenders are reluctantly acknowledging that the banking industry’s “extend and pretend” strategy is in decline and that a significant number of property owners, particularly those who own office buildings, are likely to default on their mortgages.

This implies that lenders are going to experience substantial losses and bank earnings will decline.” The commercial real estate market is still experiencing the negative effects of the increasing prevalence of work-from-home lifestyles.

According to recent data from ATTOM, a real estate data provider, there were 625 commercial real estate foreclosures nationwide in March, which is a 117% increase from the previous year.

California experienced the most significant increase in foreclosures, with 187 foreclosures recorded since March 2023, representing a 405% increase.

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