‘We should be on the alert for more problems’

themarketNZZ/Chistopher Gisiger interview of Raghuram Rajan/5-15-2023

“The recent events highlighted mid-sized banks with volatile deposits and asset problems. I think the asset problems haven’t gone away. There are still lots of losses to be absorbed on bank balance sheets, and the problem with volatile deposits hasn’t gone away either.… As a result, there will be an issue of longer-term health of the banking system, especially regarding mid-sized banks exposed to areas like commercial real estate.” – Raghuram Rajan, Professor of Finance at the University of Chicago and former Governor of the Reserve Bank of India

USAGOLD note: Above is Rajan’s reasoning on why the banking system still needs watching. The chart below from the FDIC speaks a thousand words………

Total unrealized gains or losses on investment securities held by FDIC-insured banks
Chart courtesy of the FDIC • • • Click to enlarge