Amid stress tests and seemingly positive “news” Americans’ Confidence in Banks Hits New Low:
As the Treasury and banking regulators prepare to provide a description of their banking “stress” tests on Friday and the results on May 4, the percentage of Americans saying they have a “great deal” or “quite a lot” of confidence in U.S. banks has fallen to 18% — down 14 percentage points from a June 2008 Gallup Poll and 23 points from a June 2007 poll.
I think whoever proclaims that we might have hit some magic bottom or that we are out of the woods is utterly mistaken. We have certainly seen an all to familiar bear market rally, and banks have made their earnings look appealing. But fundamentals haven’t changed. Consumer credit is just beginning to unravel. Commercial real estate is about to implode:
Since late 2007, a total of 47 banks and savings institutions have failed, of which a dozen or so had unusually high commercial-mortgage exposure. Foresight Analytics in Oakland, Calif., estimates the U.S. banking sector could suffer as much as $250 billion in commercial real-estate losses in this downturn. The research firm projects that more than 700 banks could fail as a result of their exposure to commercial real estate.
Bank failures will likely be rampant. So long as the business cycle correction is being slowed down, the economy is likely to continue down the path it has been on for the past 2 years.