With the price of gold futures recently hitting a new all-time high of $2,200 before backing pulling back, this crisis will fuel gold’s continued rise to new all-time highs.
Banking Crisis Yet Another Gold Bull Catalyst
March 13 (King World News) – Gerald Celente: Four private equity firms have together spent a reported $1.05 billion to buy stock in the ailing New York Community Bancorp (NYCB).
On 31 January, NYCB’s share price plunged by a record 38 percent after the company announced it would make sharp cuts to its stock dividend and hoard cash. NYCB holds a hefty portfolio of commercial real estate loans, an increasing number of which are troubled.
The news sank the company’s stock to $6.47, its lowest ever, and dragged the KBW Regional Banking Index to its worst day since the March 2023 collapse of Signature and Silicon Valley banks.
Then on 1 March, the company admitted that the bank’s executives had found “material weakness” in the way the company monitors and weighs risks in its loan portfolio. The company’s stock fell almost 26 percent on the news, closing at its lowest since 1996.
Six days later, NYCB reported its total deposits had slid from more than $83 billion in early February to $77.2 billion on 5 March as customers moved their money to safer places.
Fitch Ratings has cut the company’s credit rating to junk.
Now Hudson Bay Capital, Reverence Capital Partners, and Liberty Strategic Capital—created by Steve Mnuchin, Donald Trump’s former treasury secretary—have swooped in to buy more than $1.05 billion worth of the bank’s stock at $2 a share.
Liberty is putting $450 million into the purchase. Hudson Bay is in for $250 million and Reverence for $200 million. Liberty, which counts Saudi Arabia’s Public Investment Fund among its backers, will invest $450 million. Citadel Global Equities, an operation of the Citadel hedge fund, has invested an unspecified amount.
The investors paid $2 a share for the Bancorp common stock but also picked up options on convertible preferred stock that they can buy for $2. In addition, the new investors receive warrants allowing them to buy more shares later at $2.50 a share.
News of the deal sent NYCB’s stock price to $3.46.
The new investors have named Joseph Otting, U.S. Comptroller of the Currency under Trump, as the company’s new CEO. He replaces Alessandro DiNello, who became interim CEO on 29 February. DiNello returns to his place as non-executive chair of the board.
As part of the deal, Mnuchin, Otting, and two other executives of the private equity group will join Bancorp’s 12-person board, which the private equity investors plan to reduce to nine.
Mnuchin and Otting are long-time cronies. Mnuchin assembled a different gang of billionaires during the Great Recession to buy collapsed mortgage lender IndyMac and turned it into OneWest Bank, for which Otting was hired as CEO.
NYCB has been a key lender to owners of apartment buildings governed by stringent rent controls, which have cut landlords’ cash flow and shrunk their margins. The bank also has lent on offices in one of the regions hit hardest by remote work, which has sunk occupancy and rental rates.
“New York Community Bancorp’s $1-billion equity investment should ease concerns about the lender’s capital levels and management capabilities,” analysts at Bloomberg Intelligence wrote in a note.
“While NYCB’s junk-rated subordinated debt trades at distressed levels, higher capital will help absorb potential loan loss reserve increases if commercial real estate conditions worsen,” they added.
“While painful for existing shareholders”—who saw their equity diluted by a billion dollars—“it should quiet systemic concerns for NYCB,” analyst Christopher McGratty at Keefe, Bruyette & Woods wrote in his note. “This should help broader sentiment for the bank group.”
PUBLISHER’S NOTE:
Mnuchin has made a fortune buying troubled properties.
At OneWest, he earned national infamy by specializing in foreclosing on homeowners suddenly unable to make their mortgage payments. A OneWest executive said in court she “robo-signed” 750 or more foreclosure documents week after week, spending no more than 30 seconds reviewing each one.
OneWest also was found guilty of an illegal practice called “dual tracking,” in which one part of the bank told troubled homeowners to work with the bank to modify their loan, while another part proceeded with foreclosure anyway.
As U.S. Treasury Secretary under Trump, he approved billions in bailouts for Wall Street investment banks…
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NUMBER OF TROUBLED U.S. BANKS RISES SIX-FOLD IN 2023’S FINAL QUARTER
The number of U.S. banks showing problems soared from eight to 52 in last year’s final three months, the sharpest spike since three banks failed in rapid succession in March 2023, the Federal Deposit Insurance Corp. (FDIC) reported.
The banks in trouble are small and mid-size institutions, the FDIC said. It does not name individual banks that are ailing.
The number of slow-paying credit card customers and delinquent commercial real estate loans have climbed to the highest levels in almost 10 years, the FDIC noted.
“Ongoing economic and geopolitical uncertainty, continuing inflationary pressures, volatility in market interest rates, and emerging risks in some bank commercial real estate portfolios pose significant downside risks to the banking industry,” FDIC chair Martin Gruenberg warned.
The total assets of all banks on the red list were $66 billion at the end of last year, or about 0.2 per cent of all U.S. bank assets.
TREND FORECAST:
As we said in forecasting Banks Go Bust a Top Trend of 2024, while banks are setting aside more cash against an expected wave of bad loans to office building owners and other commercial property owners, it will not be enough for the many banks that will fail.
In 2024, the banking sector’s troubles will begin to reach crisis levels in some markets. The number and rate of bank failures will increase, leaving fewer small banks and helping large banks get even larger, reducing the benefits that competition and small companies can offer consumers.
Because banks are a collecting point for economic bad news among consumers and businesses, their stocks will be an early bellwether to watch for the first signs of not only an economic downturn… but most importantly a market crash, as the banksters created to set off the Panic of ’08.
King World News note: As the next banking crisis gets underway it will be yet another catalyst that continues to send the price of gold to new all-time highs. There will be volatility along the way but the trend for higher gold prices is very clear. Expect silver and the high-quality mining and exploration stocks to begin to assert themselves as well as they begin to move dramatically higher. For those of you accumulating physical silver, time may be running out to acquire silver on the cheap.
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