Rising credit card debt and signs of strain in CRE mortgages hint at a looming banking crisis.

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You might have missed it in the headlines, but US Bancorp recently initiated significant job cuts, with areas like talent acquisition and technology taking a hit. But what does this mean for the broader financial landscape?

Well, let’s talk about multifamily commercial real estate (CRE) mortgages – a sector that’s been quietly raising red flags. While apartments have held up better than other segments like office and retail, cracks are starting to show, with some eye-popping defaults in recent months.

Here’s the kicker: the bulk of these multifamily mortgages aren’t held by banks, but by government agencies, pension funds, and other investors. And with credit card debt soaring to levels not seen since before the 2008 Financial Crisis, the stage is set for trouble.

The typical consumer now pays over $500/month toward their credit card alone. As interest rates rise, so are delinquency rates. Higher rates for longer means more trouble as we now have record credit card debt.

Additionally, US consumer SERIOUS (90+ days) delinquency rates in auto loans and credit card debt for the most productive cohort (18-39) have been the highest since the Great Financial Crisis. The US consumer is getting into more trouble as time passes.

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Vanguard’s recent revelation that the Federal Reserve may not cut rates this year adds another layer of uncertainty to the mix. As households pile on credit card debt to combat inflation, banks could find themselves in hot water.

So, what’s the bottom line? Keep an eye on the banking sector, folks – there may be stormy weather ahead.

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