
Tony Abbott: Keeping the Right in the Fight
Sussan Ley is under no immediate threat as leader, but the party remains fundamentally divided and conflict lies just below the surface. Four days on…
Thought Leader: Tony Abbott
A three-pronged financial disaster is bearing down on the US economy, Kevin O’Leary has warned.
“We’ve got the pressure at the regional banks, commercial real estate collapse, and small business not getting any capital,” the “Shark Tank” investor told “Kudlow” in a recent interview. “This is all bad news.”
The Federal Reserve has rushed to crush historic inflation by hiking interest rates from nearly zero to north of 5% since last spring. Higher rates have hammered regional banks’ portfolios of bonds and CRE, spurring them to pull back on lending in fear of a wave of loan defaults, or customers pulling their deposits out and sparking another Silicon Valley Bank-style collapse.
CRE values have also been hit by the pandemic-fueled shift to remote working, which has slashed demand for office space. Many small businesses and CRE developers rely heavily on debt financing from smaller banks, meaning higher rates and a credit crunch pose serious threats to them.
“There’s big problems, and it’s gonna manifest itself in these regionals over the next 36 months,” O’Leary said, noting CRE will suffer a “correction” as developers face the prospect of refinancing loans at much higher interest rates for buildings that have plunged in value. “These banks are going to fail because up to 40% of their portfolio are in CRE.”
The celebrity investor — whose nickname is “Mr. Wonderful” — added that many commercial buildings were built with mortgages costing 5% to 7% in annual interest. Many won’t be economically viable if those loans have to be refinanced at 9% to 11%, he said.
O’Leary warned in August that growing signs of pressure on regional lenders and a credit crunch might cause a “real run on the banks,” as businesses move their payroll accounts to Wall Street titans like JPMorgan for security.
He cautioned in another recent interview that the Fed was likely to lift rates higher than 6%, sending residential mortgage rates from a little over 7% today to above 8%. Moreover, he said it was “weird” that unemployment hasn’t jumped and a recession hasn’t set in despite the surge in borrowing costs.
Tony Abbott: Keeping the Right in the Fight
Sussan Ley is under no immediate threat as leader, but the party remains fundamentally divided and conflict lies just below the surface. Four days on…
Thought Leader: Tony Abbott
Dr. Sanjay Gupta: Should You “Lean Into” Your Chronic Pain to Relieve It?
Dr. Sanjay Gupta sits down with researcher and clinical therapist Dr. Eric Garland to explore how mindfulness meditation can be as effective as opioids in…
Thought Leader: Sanjay Gupta
Newt Gingrich outlines 3 key components for a “DRAMATICALLY better America”
Former House Speaker Newt Gingrich discusses the U.S. economy, Trump’s tariffs, A.I. and more on ‘Kudlow.’ Few figures in American politics bring the depth of…
Thought Leader: Newt Gingrich