JP Morgan, Wells Fargo, and Citigroup have been bracing for an avalanche of default loans because of the pandemic. They collectively set aside $28 billion in the second quarter to cover losses on bad loans.
The extra money set aside indicates that banks expect a slower economic recovery from the pandemic recession, marked by defaults. Spike in virus cases led many states to close sectors or suspend reopening plans.
He noted that even before the pandemic, half of Americans weren’t able to handle an unexpected $1,000 expense. Government-mandated shutdowns made matters worse.
When mortgage or rents are not paid, landlords can’t pay off their debt to the bank. According to Wolff, we’re looking at months if not years of crushing litigations–another expense people will not be able to carry. It’s a tsunami in economic terms.
Big banks have money to cover their losses, but the average American doesn’t.
We’re going to have this spectacle — on top of everything else happening to us — of that American situation in which we have homeless people sitting on the curb, across the street from unoccupied apartments and homes.