Report: Five Banks Have a Combined Half Trillion Dollars in Commercial Real Estate Loans; Number 1 is JPMorgan Chase

[Gunnar Larson]

https://wallstreetonparade.com/2024/03/report-five-banks-have-a-combined-half-trillion-dollars-in-commercial-real-estate-loans-number-1-is-jpmorgan-chase/


By Pam Martens and Russ Martens: March 28, 2024 ~

JPMorgan Chase Bank BuildingYesterday, American Banker released a report
showing that five banks in the U.S. hold a combined half trillion dollars
in commercial real estate (CRE) loans. It came as a big surprise to a lot
of folks that the bank holding the largest amount of CRE loans is JPMorgan
Chase – whose bank holding company is also exposed to $49 trillion in
derivatives as of December 31, 2023 according to the Office of the
Comptroller of the Currency. (See Table 14 at this link.)

JPMorgan Chase is already considered the riskiest bank in the U.S.
according to its regulators.

American Banker reported the following CRE totals for the five banks:
JPMorgan Chase, $173 billion; Wells Fargo, $139.65 billion; Bank of
America, $82.8 billion; U.S. Bank, $55.66 billion; and PNC Bank, $48.89
billion.

Some of the same hubris and willful blindness that prevailed in the runup
to the subprime mortgage crisis that blew up large financial institutions
in 2008 is showing itself today in regard to commercial real estate loans
at federally-insured banks.

On March 7, Federal Reserve Chairman Jerome Powell testified before the
Senate Banking Committee as part of his Semiannual Monetary Policy Report
to Congress. During his testimony, Powell downplayed concerns about the
impact of commercial real estate loans at the largest banks. Powell stated:
“There will be bank failures, but this is not the big banks. If you look at
the very big banks, this is not a first order issue for any of the very
large banks. It’s more smaller and medium size banks that have these
issues.”

If CRE is not a problem at the largest banks, that’s because both the banks
and the Fed believe that the Fed will always spring to the rescue with an
emergency bailout program. In fact, the Fed has already created just such a
program that’s waiting in the wings. It’s called the Standing Repo Facility
(SRF). It has a lending capacity of $500 billion and can lend to both the
federally-insured bank and its trading unit (primary dealer) – thus giving
the so-called “universal banks” on Wall Street two bites at the bailout
apple.

For a look at just how quickly the Fed can sluice money to Wall Street mega
banks with few questions asked by Congress, check out the chart below. It
shows the Fed’s emergency money spigot to the mega banks in the last
quarter of 2019 – for a financial emergency at the banks which has yet to
be explained to the American people.

Fed's Repo Loans to Largest Borrowers, Q4 2019, Adjusted for Term of Loan

To grasp how radically things have changed since 2008 when former Goldman
Sachs veteran-turned Treasury Secretary Hank Paulson took a 3-page document
to Congress and demanded a $700 billion taxpayer bailout for the banks
(Troubled Asset Relief Program, TARP), let the full meaning of the chart
above sink in. The Fed can now funnel trillions of dollars in cumulative
loans to mega banks on Wall Street, report the names of the banks and
amounts borrowed two years later, and get a complete news blackout from
mainstream media. (Wall Street On Parade was the only media outlet to chart
the details and report the names of the banks that got the trillions of
dollars in loans in 2019.)

Powell might have his own agenda in playing down the risks to the mega
banks on Wall Street. According to Senator Elizabeth Warren, who sits on
the Senate Banking Committee, Powell is leading the charge behind the
scenes to overturn federal regulators’ proposal to require the largest
banks to hold larger amounts of capital to prevent a replay of the 2008
financial crisis.
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