Powell’s Countdown: The Federal Reserve’s March 11 Deadline Sparks Financial Turmoil

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Get ready for a financial rollercoaster as Jerome Powell pulls the rug on the BTFP emergency funding for banks on March 11, 2024. If it feels like déjà vu from the 2020 crash, you’re not alone – this time, it’s Powell orchestrating a market shakeup that’s sending bank stocks tumbling reminiscent of the 2009 financial crisis.

The ripple effects are making headlines worldwide, from Japan to Korea and Germany. Powell, the maestro behind this orchestrated crash, is steering the ship toward economic turbulence. Amidst the chaos, commercial real estate (CRE) is emerging as a vulnerable sector, with consequences echoing the aftermath of the 2009 Global Financial Crisis.

The commercial real estate sector, already under pressure globally due to rising interest rates, faces an unprecedented collapse in the United States. Since the Federal Reserve began raising interest rates in March 2022, commercial property prices have plummeted by 11 percent, erasing gains from the previous two years. The knock-on effects are spreading, with a looming risk of 1 billion square feet of unused office space by the new decade, according to Cushman & Wakefield data.

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The vulnerability of CRE property performance is particularly concentrated in office properties, as loans mature and leases come to an end. This trend is poised to worsen with approximately $325 billion of loan maturities looming, raising concerns about refinancing in a higher interest rate environment and slowing demand for commercial real estate space.

The collateral damage extends beyond the United States, with banks globally feeling the heat. Deutsche Pfandbriefbank in Germany, Aozora Bank in Japan, and even Deutsche Bank are facing challenges due to strains in CRE. The US regional bank index has already fallen more than 10 percent, with some banks experiencing losses of 15 percent or more, mainly those heavily exposed to CRE or multifamily residential property.

As we approach Powell’s self-imposed deadline, the question looms: How big will this financial storm become? The warning signs are there, and the financial sector is on high alert as regulators push for higher capital and liquidity to weather the impending economic tempest. Investors and financial institutions alike are advised to buckle up for what could be a bumpy ride in the days leading up to March 11, 2024.

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Sources:



www.ft.com/content/9ecc5c07-39e7-47d0-91f4-a151ecc42873
finance.yahoo.com/news/problem-ll-working-years-fed-202107790.html

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