As of this time last year, Bank of America employed 15,000 people in the city of Charlotte, NC. It is one of North Carolina’s largest private employers.
The last couple of days have been a whirlwind for this company which is one of the largest banks nationwide. It has apparently gotten itself into some degree of trouble.
A high interest rate economy can cause banks to make more money. However, if the economy is tanking, then less loans are originated.
But there is a potentially bigger problem. That is the mix of Treasury notes and bonds in which the bank invests in a high inflation environment; and when they come due. That is the problem that sunk several banks earlier this year. If depositors perceive instability, bank runs can occur very quickly.
It is unclear to what extent jobs with Bank of America might be in jeopardy.
A couple of voices are predicting the potential for a severe recession and/or collapse. From the left, Mohamed el-Erian makes the case.
And on the right, Peter Navarro makes a similar case from a different point of view. He is an economist who served in the Trump Administration. The current environment includes rising interest rates; high inflation; failure of the commercial real estate sector (especially with respect to office real estate); bank failures and instability in the bond markets; our nation’s $2 trillion annual deficit; rising costs of oil; and our enormous national debt with the poverty cycle it is beginning to create. Navarro also cites the prolonged unnatural stimulation of the economy by the Federal Reserve that ultimately must have consequences. His substack article is found here. But he also had an extended appearance on War Room yesterday that you might want to check out.