During his recent interview with RiskReversal Media, Jim Chanos discussed the bigger credit event that’s coming for regional banks. Here’s an excerpt from the interview:
Chanos: With the proviso that never underestimate the ability of the government to screw things up. I mean our view is that this is not a credit transmission device. I think this is really a funding problem at a select number of banks that just simply mismanaged Banking 101.
Which is to try to at least meaningfully match your assets to liability durations, and not stretch for yield, and finance it overnight at zero percent.
Because at the end of the day if you remember what sunk the investment banks in ’08, and I know Danny does, it’s because they ended up with a whole bunch of toxic hard to market, hard to value securities, at the bottom of their balance sheets financed in the basically overnight repo market.
You can’t do that, and we found out that the hard way again this go around.
Now having said that the regional banks are now under scrutiny have another longer term problem and that is as we’ve discussed sometimes in the past, their reliance on commercial real estate.
And the credit event that’s in the future is in commercial real estate, probably not long-term bonds at this point.
You can watch the entire discussion here:
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