2024 Supervisors Symposium

Main messages

Internal Use Only

• The US economy is strong.

• But monetary and fiscal policy errors have been and remain significant. These errors kicked off a banking crisis in 2023 and will continue to affect banks through higher interest rates and liquidity.

• Core messages

• 2023 we were in the acute phase of a US banking crisis; we remain in a banking crisis but are now in a chronic phase with parts of the industry trying to earn its way out of rate losses.

• Loss of confidence in capital is foundational to every banking crisis. Capital remains weak at some firms.

• CRE problems are growing.

• Limit interest rate sensitivity and keep ample liquidity; expect interest rate and economic volatility.

Commercial Banking Program (CBP) Adam C. Sinn ‘00 Department of Finance

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Internal Use Only

The US economy is strong and actually stronger than earlier this year Q4 2019 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 US GDP (Q/Q, SAAR) 2.8% 4.4% 3.4% 1.6% 3.0% 2.8% Personal 1.76% 1.72% 2.33% 1.30% 1.90% 2.46% CBO ESTIMATES OF US OUTPUT GAP RELATIVE TO GDP WIDER March 2024 June 2024 0.8% 0.9% consumption expenditure

Net exports

1.40% -0.10

0.09% -0.61% -0.90% -0.56%

Change in inventories Fixed investment

-0.78% 1.34% -0.47% -0.49% 1.05% -0.17%

-0.19% 0.45% 0.62% 1.14% 0.42% 0.24%

Govt spending 0.57% 0.94% 0.61% 0.30% 0.52% 0.85%

Source: BEA, Bloomberg

Commercial Banking Program (CBP) Adam C. Sinn ‘00 Department of Finance

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