Now a $1 trillion tsunami of high-quality government paper is slated to hit markets before September, at a time when Michele warns the Fed is already draining $95 billion in liquidity—the oxygen that fuels asset prices—every month through quantitative tightening.

“This [regional bank failures] does remind me an awful lot of that March-to-June period in 2008,” Michele told CNBC in an interview on Friday, citing the three-month rally that followed the Bear deal. “The markets viewed it as: there was a crisis, there was a policy response and the crisis is solved.”

Bob Michele, who is responsible for managing $700 billion in assets for the world’s most valuable bank [JP Morgan], believes there are too many current parallels to the 2008 global financial crisis to simply dismiss the idea of a repeat out of hand.

More than $1.4 trillion in U.S. CRE loans are due to mature by 2027, with $270 billion alone coming due this year, according to real estate data provider Trepp. Much of this debt will have to be rolled over at higher rates.
“There are a lot of companies sitting on very low-cost funding,” Michele said. “When they go to refinance, it will double, triple or they won’t be able to [roll it over] and they’ll have to go through some sort of restructuring or default.”

Hank, if you think that my system is too funny, I welcome you to dive a bit into it(link). Several did and doing very well. The whole idea is to find great risk/reward funds, small AUM is a plus, an uptrend is a must + owning only 2-3 funds.

Park Hotels & Resorts, the owner of two of San Francisco’s biggest hotels — Hilton San Francisco Union Square and Parc 55 — has stopped mortgage payments and plans to give up the two properties, in another sign of disinvestment in hard-hit downtown.
Park Hotels & Resorts said Monday that it stopped making payments on a $725 million loan due in November and expects the “ultimate removal of these hotels” from its portfolio. The company said it would “work in good faith with the loan’s servicers to determine the most effective path forward.”
The 1,921-room Hilton is the city’s largest hotel and the 1,024-room Parc 55 is the fourth-largest, and together they account for around 9% of the city’s hotel stock. The hotels could potentially be taken over by lenders or sold to a new group as part of the foreclosure process.
“After much thought and consideration, we believe it is in the best interest for Park’s stockholders to materially reduce our current exposure to the San Francisco market. Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges — both old and new,” said Thomas Baltimore Jr., CEO of Park Hotels, in a statement.
Those challenges include a record high office vacancy of around 30%, concerns over street conditions, a lower rate of return to office compared to other cities and “a weaker than expected citywide convention calendar through 2027 that will negatively impact business and leisure demand,” he said.
Park Hotels said San Francisco's convention-driven demand is expected to be 40% lower between 2023 and 2027 compared to the pre-pandemic average.
San Francisco Travel, the city’s convention bureau, expects Moscone Center conventions to account for over 670,000 hotel room nights this year, higher than 2018’s 660,868 room nights but far below 2019’s record-high 967,956. And weaker convention attendance is projected for each following year through 2030.
Tourism spending more than doubled in 2022 to $7.4 billion compared to the previous year. A full recovery isn’t expected until 2024 or 2025.
The company expects to save over $200 million in capital expenditures over the next five years after giving up the hotels, and to issue a special dividend to shareholders of $150 million to $175 million. The company's exposure will shift away from San Francisco towards the higher-growth Hawaii market.
Parc 55 is a block from Westfield San Francisco Centre, the mall where Nordstrom is departing, and the block where Banko Brown, an alleged shoplifter, was killed in a shooting outside a Walgreens in April. Nearby blocks are also full of empty storefronts, as tourist and local foot traffic hasn’t fully recovered.
Other hotels have faced financial distress. Atop Nob Hill, the historic Huntington Hotel was sold earlier this year after a mortgage default.

State Farm General Insurance Company, State Farm’s provider of homeowners insurance in California, will cease accepting new applications including all business and personal lines property and casualty insurance, effective May 27, 2023. This decision does not impact personal auto insurance. State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.
We take seriously our responsibility to manage risk. We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California. However, it’s necessary to take these actions now to improve the company’s financial strength. We will continue to evaluate our approach based on changing market conditions. State Farm® independent contractor agents licensed and authorized in California will continue to serve existing customers for these products and new customers for products not impacted by this decision.

The market timing and late trading issues of the mid 2000’s were caused, in certain cases, by the lack of transparency regarding beneficial mutual fund owners invested through omnibus accounts. Rule 22c-2 under the 1940 Act, which the SEC adopted in response to those scandals, requires a fund to enter into written agreements with financial intermediaries, including those maintaining omnibus account positions with the fund, in which the intermediary agrees to provide the fund with certain shareholder information upon request and to implement any fund-imposed trading restrictions on investors identified by the fund as having violated the fund’s frequent trading policy

Although these policies are designed to deter frequent trading, none of these measures alone, nor all of them taken together, eliminate the possibility that frequent trading will occur in these funds, particularly with respect to trades placed by shareholders who invest in these funds through omnibus accounts maintained by brokers, retirement plan accounts, and other financial intermediaries. The Funds’ access to information about individual shareholder transactions made through such omnibus arrangements is often unavailable or severely limited. As a result, the Funds cannot ensure that their policies will be enforced with regard to those fund shares held through such omnibus arrangements (which may represent a majority of fund shares), so frequent trading could adversely affect these funds and their long-term shareholders as discussed above.

@dt. What safety rating are you using? Thanks for your posts.

• 1) I am a regional bank and I’ve got a customer with a $450,000 deposit.
• 2) You are a different regional bank and you’ve got a customer with a $450,000 deposit.
• 3) I am worried that my customer will take out $200,000 of her money and move it elsewhere to get FDIC insurance.
• 4) You are worried that your customer will take out $200,000 of his money and move it elsewhere to get FDIC insurance.
• 5) We trade those $200,000 deposits: I put $200,000 of my customer’s money in your bank, and you put $200,000 of your customer’s money in my bank.
• 6) Now both our customers have $450,000 of insured deposits, and neither of us has lost any net deposits: I lost $200,000 from my customer but got $200,000 back from your customer, and vice versa.

Beverly Hills, California-based PacWest’s website says clients can “rest assured” because the bank can offer up to $175mn in insurance coverage per depositor, or 700 times the FDIC cap. … The bank said in its most recent financial filing that it was enrolling more of its customers in “reciprocal deposit networks”, over which hundreds, or in some cases thousands, of banks spread customers’ funds in order to stretch insurance limits.
The biggest of these networks is run by IntraFi, a little-known Virginia-based technology group. ...
Banks can divert large accounts into the networks, where they are parcelled up into $250,000 chunks and sent off to other FDIC-insured banks. The networks match up the parcels so that any bank sending a customer’s deposits into the system immediately receives a similarly sized parcel from another bank.
Crucially, the networks allow banks to increase their level of insured deposits while giving large customers seamless access to their money. Banks pay the network operators a small management fee.
Reciprocal deposits still make up just 2 per cent of the $10.4tn in deposits insured by the FDIC. But they made up a notable 15 per cent of the growth in insured deposits in the first quarter. The share of deposits covered by the federal Deposit Insurance Fund was highest in at least a decade at 56 per cent.

“Banks are using reciprocal deposits aggressively, as they should,” says Christopher McGratty, an analyst who follows regional banks for Keefe, Bruyette & Woods. He said that in the wake of SVB’s collapse, investors wanted banks to reduce their use of uninsured deposits. “It’s a bit of window dressing, but it’s legit,” he said.

Others have been more sceptical. “To the extent that these deposit exchange programs help weak banks attract deposits, it creates instability,” said Sheila Bair, who headed the FDIC during the global financial crisis. She has called out the deposit exchanges for “gaming the system,” in the past. “It increases moral hazard. There are many good banks that use these exchanges but the exchanges also allow weak banks to attract large uninsured depositors who wouldn’t otherwise bank with them.”