It’s not a matter of if—it’s a matter of when. Experts are sounding the alarm: regional bank failures are not just a possibility, they’re a looming reality. As more banks teeter on the edge, many people might be underestimating just how deep the consequences will run. From real estate investors to everyday savers, the fallout could leave many scrambling for safety. But what can you do?

How It Starts: The Domino Effect of Commercial Real Estate

The collapse is being led by the distress in commercial real estate (CRE)—specifically, the office sector. With the shift toward remote work, commercial buildings are losing tenants and their value is plummeting, often sinking below the balance of their mortgages. Office buildings in major U.S. cities are being sold at drastically discounted prices—some even at 60% less than their original value. This significant drop is starting to hit the banks that have heavily invested in CRE loans.

Here’s the scary part: more than half of the FDIC-insured banks in the country have “excessive” CRE loan exposure. This means these banks are deeply reliant on an industry that’s crumbling. Many of these banks are smaller regional lenders, and they’re about to be wiped out as a result.

But it doesn’t stop there.

Why Small Banks Matter: A Collapse Could Lead to a Financial Crisis

These small and midsize banks play a crucial role in lending to the real estate industry. When they collapse, the big banks—like JPMorgan and Bank of America—won’t rush in to fill the gap. Why? Because large banks have largely avoided the commercial property market. This means real estate developers and investors will be left scrambling for financing options, driving up borrowing costs and pushing more businesses into failure.

To make matters worse, banks have been hiding the true extent of their CRE losses by extending loan deadlines and keeping “bad” loans off their books. But eventually, this game of financial chicken will come to an end. When it does, the financial system will face an enormous shockwave.

Could Your Bank Be Next?

Bank failures don’t just affect the real estate world—they can affect you directly. The collapse of Silicon Valley Bank and Signature Bank last year showed just how quickly things can unravel. Uninsured depositors, those with more than $250,000 in a bank, are often the first to panic and withdraw their money, leading to bank runs that trigger even more failures. And it doesn’t stop with the small banks. If regional banks start to collapse en masse, bigger banks could be dragged into the crisis as well.

The FDIC Safety Net: Not as Secure as You Think

Many people think the FDIC will bail them out in the event of a bank failure. But here’s the catch: the FDIC only has so much money. In fact, they only have enough funds to cover about half a percent of the total assets in the U.S. banking system. If hundreds of banks start to fail—as some experts are predicting—the FDIC could quickly run out of money, leaving depositors at risk of losing their savings.

Diversify Before It’s Too Late: Protecting Your Assets with Gold

With bank failures on the horizon and real estate markets teetering, the importance of diversification has never been clearer. Banks and the stock market are vulnerable to the same economic forces, which means your savings and investments could be at risk. Gold, however, offers a way to hedge against these uncertainties.

For centuries, gold has been a reliable store of value, especially during times of financial instability. As the U.S. dollar loses purchasing power and inflation eats away at your savings, diversifying with gold could protect your wealth. If you’re not considering precious metals as part of your portfolio, you may find yourself wishing you had, as the financial landscape continues to shake.

Conclusion: Prepare Now Before It’s Too Late

We’re standing at the edge of a financial storm. Regional banks are on the brink of collapse, commercial real estate is crumbling, and the safety nets we’ve relied on might not hold. While the experts warn of what’s to come, now is the time to act. Diversifying your assets—especially into gold—could be the protection you need in a world of growing financial uncertainty.

Don’t wait for the crash to happen. Prepare yourself now before the next wave of bank failures sweeps across the country.

Source: https://therealdeal.com/magazine/july-2024/bank-failures-are-coming-heres-how-it-could-play-out/