3 Reasons Banks Are In Trouble In The Short Term
Banks are in trouble… And the cracks in the financial system are beginning to show.
Millions more not paying their other bills.
These things are already leading to problems in the banking system… Which is why The Fed enacted rules to enforce financial institutions to conserve capital.
This now 4-month long crisis is beginning to hammer banks… Not just with the limits above.
These things combined are reason #1 banks are in trouble in the short term.
Reason #2 is that banks are already building huge loss reserves.
- Wells Fargo – now has a bad debt reserve of $4 billion.
- JP Morgan – now has a total bad debt reserve of $8.3 billion.
- American Express – now has total bad reserves of $2.6 billion.
These are just a few examples… This is happening worldwide when it comes to companies, and it goes all the way up to country governments too.
Countries debt problems are reason #3 banks are in trouble in the short term.
Japan is facing up to $7.4 billion in potential bad debt in 2020 related to the coronavirus.
China is facing up to $790 billion in potential bad debt.
And on and on.
These bad debts at banks and other financials mean there will be less money in the banking systems. And the same goes for countries inability to pay their debts too.
The more people who can’t pay their bills means banks earn less revenue and profits.
This means problems at the banks and fewer new loans available in the future.
The same thing happens when a country isn’t getting paid back debts, they loan out too.
This leads to even lower revenue and profits and banks and countries because they either won’t get paid back at all. Or they’ll only get partial payments.
When banks and other financial institutions revenues and profits fall it means they have less new money to loan out to people.
And this is when credit markets can freeze up making it almost impossible to get new loans to fund business operations and staffing, growth, new car and home loans, etc.
This was the largest issue back in 2007 and 2008… The banking system froze up.
No one was getting paid back on loans… Which meant no one was lending money. And this led to business closures and bankruptcies.
This entire cycle will harm the banks and the entire financial system if not fixed soon… But it also affects you too.
Click here to see what happens to not only you but also the entire financial system when Millions of Americans Are No Longer Paying Their Bills.
And to find out why the financial system is now showing cracks, click to learn why Banks Are Being Forced By Fed To “Conserve Capital.”