The last week could have given many on Wall Street whiplash. The closure of Silicon Valley Bank and Signature Bank by the FDIC led to a selloff in the shares of many regional banks late last week and a panicked weekend for many more, with calls for some government intervention to bail out SVB and Signature to stop the spread of more systemic issues. The Biden administration is obliging with a sort-of bailout of both banks by making their depositors whole and hopefully stemming a depositor panic across the country’s banks. And as of Tuesday, stocks for many regional banks started to rally, albeit remaining below their levels before the sell-off.
The ordeal, plus favorable CPI data released on Tuesday, could prompt the Fed to moderate its next interest rate hike at its next meeting later this month. Depending on how the next week goes, no increase could be a possibility, which would have been a dream come true for most lenders and borrowers if not for what this recent episode could do to liquidity in the coming months. In the last year, regional and local banks have continued to lend as national banks were on the sidelines, helping to fuel the weakened acquisition and construction markets. So, the last thing borrowers in the seniors housing and care industry needed was those lenders pulling back out of an abundance of caution, even if property values correspondingly fall.
