Weekly Comic: Banking collapses heighten Commercial Real Estate fear
By Geoffrey Smith
Investing.com --The rout of 2023 is turning into a whodunnit without a murder weapon.
One of the big differences between the current wobble in the banking sector and 2008 is that the crucial weakness of banks involved has been on the liability side. It was the deposit runs from Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) that exposed the weaknesses in how they managed their assets: these were of good quality, but had to be sold hastily to cover demands for liquidity, thus making paper losses real ones.
Thats a clear contrast with 2008, when the core problem was junk mortgage loans offered to people who had little or no chance of repaying them.
We argued last week that one key reason to think that the financial system will avoid a rerun of 2008 is that there is no class of assets big enough or rotten enough to play the role that subprime credit did then. That is still true today. But if you were forced to finger one asset class take could play that role, it would most likely be commercial real estate.