The mid-March 2023 collapse of Silicon Valley Bank and Signature Bank led to a great deal of volatility in the financial markets, causing concerns and uncertainty about how it might impact the U.S. economy. Fifteen years after the failed banks that helped spur the Great Financial Crisis, experts tell us there are differences between then and now. Certainly there are worries about empty office buildings and upcoming commercial real estate debt maturities, but when SVB Bank and Signature Bank failed, Federal Reserve & FDIC moved quickly to prevent any potential contagion to other financial institutions.
David Gottleib from GottsLaw LLC attributes much of 2008’s Great Financial Crisis (GFC) to lenders overindulging in derivatives & subprime market which caused a housing bubble burst; whereas our current crisis stems from COVID-19 consequences plus a run-up in interest rates – more akin to a confidence crisis that will pass according Tower Capital Principal Adam Finkel’s opinion . Banks have set aside more capital for reserves than before GFC & require more equity when issuing loans; however with tighter lending standards borrowers turn elsewhere for financing not as prevalent during late 2000s such as bridge lenders due ultra low interest rate environment disappearing per Red Capital Holdings CEO Gary Bechtel’s comment .
Though banks aren’t lending like three years ago mid size ones were most active during Q1 2023 while big ones didn’t completely shut down loan production either – yet biggest area concern is April through year end new credit extended category where borrowers hard pressed unless willing accept low leverage higher rates stricter standards per Finkel’s statement . CRE borrowers still need work hard obtain debt “more constrained credit market” said Bechtel requiring time capital markets adjust determine comfortable doing added Gottleib concluding yes could be correction or recession contraction lending markets but not looking at 2008 scenario – “GFC felt self inflicted than current situation” he concluded “lenders learned many lessons resulting equity tougher underwriting standards.”
