- The US banking system is in a tough spot again with half a trillion of unrealized losses.
- $517 billion of unrealized losses have been recorded due to high mortgage rates.
- This has pushed 63 lenders to the brink of insolvency, Bitcoin pump ahead.
The US banking system is one again under hot water as $517 billion is recognized as unrealized losses. The FDIC says 63 lenders are on the brink of insolvency. Will these US banks have to be bailed out again or will Bitcoin and cryptocurrency bring a solution?
According to the Quarterly Banking Profile report, the US banking system is once again on the rise for unrealized losses. The FDIC says banks are now experiencing over half a trillion dollars in paper losses as proven by their balance sheets.
Another cause for this likely event leading to the unrealized losses is most likely caused by exposure to the residential real estate market. To highlight, these unrealized losses come from representing the difference between the price banks have paid for securities vs the current market value of these assets.
This cause for losses comes from the fact that banks can hold securities only until they mature. This means they cannot mark them onto the market of their balance sheet leading to unrealized losses and creating extreme liability for banks in times of liquidity demand.
NEW: $517B in unrealized losses are about to hit the US banking system. FDIC says 63 lenders are on the brink of insolvency. 👀
They’re about to pump our bags hard. #Bitcoin pic.twitter.com/RQP6N90y6n
— Simply Bitcoin (@SimplyBitcoinTV) June 4, 2024
According to Simply Bitcoin, it sees this loss as a great opportunity for the crypto market. The entity says these losses will lead to FUD which means value and capital will flow from real estate to the crypto market and thus pump crypto bags.
According to the FDIC the unrealized losses come from held-to-maturity and available-for-sale securities. More so, the number of the losses went from $39 billion to $517 billion in the first quarter alone.
It also explains how the residential mortgage-backed securities contributed to the unrealized losses due to high mortgage rates in the first quarter. This latest unrealized loss hike marks the ninth straight quarter to see unusually high unrealized losses following the Federal Reserve having increased interest rates in Q1 of 2022.
Adding to the problem, the FDIC marks a number of lenders onto its Problem Bank List which also rose exponentially. The agency says these banks are close to insolvency thanks to operational, financial, and/or managerial incompetence.
