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Months of economic despair wrought by the coronavirus pandemic may lead to a wave of bank defaults as a worsening pandemic has already started prompting local governments to issue new lockdown orders, which could stall the economic recovery.
The stress of troubled loans is mounting, especially among the country's midsized and community banks, as government support propping up businesses at the start of the pandemic has evaporated. Four banks have already failed this year, including two since the start of October, according to the Federal Deposit Insurance Corp.
“We're starting to see strain in the financial system,” CCIM Institute Chief Economist K.C. Conway said. “The Fed has not really forced the banks to recognize what's going on in commercial real estate.”Conway's evidence of financial system stress is percolating in the Texas Ratio, which measures the value of banks’…
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