US Banking Crisis Looms: Ex-IMF Official Cites $359.32 Billion Exodus from American Banks, Foresees Trouble in 2024

Former Deputy Director at the IMF’s Policy Development and Review Department, Desmond Lachman, warns of an impending crisis in the US banking industry in 2024. 

Lachman, now a senior fellow at the American Enterprise Institute, points to regional banks facing heightened risks, with 18% of their loan portfolios tied to the troubled commercial real estate sector. Notably, major property investors like Brookfield and Blackstone are abandoning mortgages, raising concerns of imminent defaults by commercial property owners. This precarious situation, Lachman suggests, could trigger a new round of the regional bank crisis, posing a serious threat to economic recovery. Concurrently, US banks have experienced a significant $359.32 billion decline in deposits over the past year, according to data from the St. Louis Fed, further exacerbating concerns. 

A Federal Reserve survey, encompassing market professionals, academics, and investment firms, underscores ongoing worries within the banking sector, emphasizing the potential for renewed stress due to uninsured deposits and risks associated with commercial real estate exposures, particularly among smaller and regional banks.

Clever Robot News Desk 8^th January 2024