CELENTE: Office Building Bust Will Crash Banks...HOLD ON TIGHT

What is being ignored by the mainstream media are the dangers facing the global economy

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On the economic front, it is more of the same, but just a different day.

The U.S. equities keep riding high following the re-election of Donald Trump.

While there are fears that his tariff policies will have negative effects on the economy, at this point, it is a guessing game.

The same with his plans to cut taxes. Will the richest Americans reap the biggest rewards like his last cuts in 2017, or will We the People of Slavelandia get a cut?

What is being ignored by the mainstream media are the dangers facing the global economy.

Economies were artificially propped up with trillions of dollars in fake money backed by nothing and printed on nothing, plus negative and zero interest rate policies, are now suffering from the draconian COVID lockdown policies imposed by politicians that destroyed the lives and livelihoods of billions of people across the planet.

We continue to report on the looming Office Building Bust that will cause Banks to Go Bust.

Need more proof?

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The recent four-week office occupancy rate of the largest 10 cities in the U.S. was, according to Kastle Systems, down to 40.6 percent. Much of the decline was a result of the Thanksgiving holiday, but overall, for the year, the average is around 50 percent, while the vacancy rate, meaning empty office buildings, is at around 20 percent.

As of last week, the delinquency rates on commercial mortgage-backed securities (CMBS) was at 10.4 percent, up one percent in November, hitting its fastest spike in two years... the depth of the COVID War lockdowns.

According to Trepp data, the current CMBS delinquency rate is just .3 percent below the 10.7 percent spike during the Panic of ’08 Great Recession.

Illustrating the danger ahead, but again banned by the mainstream media, was the 31 October 2024 article in Wall Street on Parade, New York Fed Report: 27 Percent of Bank Capital Is “Extend and Pretend” Commercial Real Estate Loans... which in part states the dire office building crisis as a result of the vacancy rates and how it is being covered up.

They quote a paper written by Matteo Crosignani, financial research advisor at the New York Fed, and Saketh Prazad, a former research analyst at the New York Fed who is now a doctoral student in the Business Economics program at the Harvard Business School who wrote:

“In this paper, using detailed supervisory data, we document that banks have ‘extended-and-pretended’ their distressed CRE mortgages in the post-pandemic period to delay the recognition of losses. Banks with weaker marked-to-market capital—largely due to losses in their securities portfolio since 2022:Q1—have extended the maturity of their impaired CRE mortgages coming due and pretended that such credit provision was not as distressed to avoid further depleting their capital. The resulting limited number of loan defaults hindered the reallocation of capital, crowding out the origination of both CRE mortgages and loans to firms. The maturity extensions granted by banks also fueled the volume of CRE mortgages set to mature in the near term—a ‘maturity wall’ with the associated risk of large losses materializing in a short period of time.”

One of the scariest potential outcomes referenced by the authors is their so-called “maturity wall” when the debt bombs come due and losses pile up suddenly. The authors write this:

“…we document that banks’ extend-and-pretend has led to an ever-expanding ‘maturity wall’, namely a rapidly increasing volume of CRE loans set to mature in the near term. As of 2023:Q4, CRE mortgages coming due within three years represent 27% of bank marked-to-market capital, up 11 percentage points from 2020:Q4—and CRE mortgages coming due within five years represent 40% of bank marked-to-market capital. We show (i) that weakly capitalized banks drive this expansion, consistent with their extend-and-pretend behavior, and (ii) that the maturity wall represents a sizable 16% of the aggregate CRE debt held by the banking sector as of 2023:Q4.

“Taken together, our results highlight the costs of banks’ extend-and-pretend behavior. In the short term, the resulting credit misallocation might slow down the capital reallocation needed to sustain the transition of real estate markets to the post-pandemic equilibrium—for example supporting the conversion of office space into residential units and recreational spaces in large urban areas. In the medium term, the delayed recognition of losses exposes banks (and all other holders of CRE debt) to sudden large losses which can be exacerbated by fire sales dynamics and bankruptcy courts congestion.”

Further illustrating the reality of the looming CMBS debt bomb, today Wall Street on Parade noted that:

“Life insurers continued to allocate a substantial percentage of assets to risky and less liquid instruments, such as leveraged loans, collateralized loan obligations (CLOs), high-yield corporate bonds, privately placed corporate bonds, and alternative investments. Moreover, life insurance companies have material direct exposures to commercial mortgages and are large holders of commercial mortgage-backed securities (CMBS). This exposure to illiquid and risky assets makes life insurers vulnerable to an array of adverse shocks, including that of an economic downturn or of a significant further deterioration of the CRE [commercial real estate] market.”

TREND FORECAST: Yes, the significant further deterioration of the CRE [commercial real estate] market,” that so few are talking about... a mega trend we warned about when we had forecast the Office Building Bust and its socioeconomic implications.