I'm Coy Wells for U.S. Money Reserve. While testifying before Congress on March 7th, 2024, Federal Reserve Chairman Jerome Powell was asked about the risks commercial real estate posed to the banking sector. In response, Powell stated, quote, “This is a problem we'll be working on for years more, I'm sure. There will be bank failures.”
Powell's comments come a year after the banking system in the United States was plunged into turmoil, starting with the failure of Silicon Valley Bank in March 2023. Ultimately, three of the five largest bank failures in U.S. history occurred in the ensuing crisis. In the aftermath of these failures, the Federal Reserve set up a program to help stabilize banks called the Bank Term Funding Program, which recently closed on March 11th, 2024.
While the problem may appear to be history, Powell's testimony highlights why banks may still be vulnerable. The commercial real estate industry is teetering on the brink of crisis and threatens to pull banks down with it. More people have shifted to working from home over the past few years, leading to less commercial real estate being utilized, rented or sold. With billions of dollars in commercial real estate loans coming to maturity in the next year on properties that are generating little, if any, income, it could lead to defaults on a massive scale.
A report issued by the Financial Stability Oversight Council on December 14th, 2023, names commercial real estate as the number one financial risk to the U.S. economy. Powell isn't the only authority forecasting bank failures. Sheila Bair, former head of the FDIC, also said banks would fail in an appearance on Fox Business's The Claman Countdown on March 5th, 2024. Ultimately, these forecasted bank failures may lead to concerns about deposit stability, market volatility and increase demand for safe havens.
Consumers looking for protection from the fallout might turn to gold. Precious metals like physical gold and silver have long been considered safe haven assets ideal for diversifying a portfolio. Precious metals have a historic track record as a store of wealth in times of economic volatility. Gold also provides strong growth potential, allowing owners to reap the benefits of rising prices while also protecting their hard earned wealth.
To learn more about the benefits of owning physical gold at home or as part of your gold backed IRA, and to receive your free gold information kit, call U.S. Money Reserve and speak to one of our dedicated account executives today.
