Banking crisis is still in the early innings
“Phase two of this crisis going on right now. [Small-to-mid-sized banks] are very aware [of their] exposure to CRE [commercial real estate] loans.... They’ve got some risk in them....
And what [banks are] worried about is there are going to be [news] stories three or four or five months from now about...[CRE credit] losses [that will spook] depositors.... They’re a little worried that maybe there will be another deposit run...as we head into a slower economy and more credit issues.
“So [these banks have] either frozen their loan-to-deposit ratio or, more likely, [are] very intent on shrinking it.... That’s why a lot of small mid-sized businesses...are getting a phone call saying politely, ‘At the end of the year, we’re not going to be able to give you a loan anymore,’ or ‘We’re going to reprice your loan on that new project we were talking about.’...
If you’re a small-to-mid-sized company,...your access [to credit] is being affected...because the banks are trying to survive....
“[So the bank crisis] is in the second or third inning, not the seventh inning.... [To use a] health analogy, the patient is stable but there’s a slow bleed...[that] can’t go on indefinitely.”
– Former Federal Reserve Bank of Dallas president Rob Kaplan, from a 4/13/2023 interview with Evercore ISI.
