Last week it was revealed that nearly one-third of Americans couldn't pay their mortgages or their rent. It's the third month in a row with over 30 percent of American renters and homeowners showing that they're in trouble, despite the stimulus check from Washington.
Tuesday, the Wall Street Journal wrote that the largest bank in the United States, JP Morgan Chase, put aside $10 billion, anticipating that the numbers of home loan defaults are going to get far worse.
"The pandemic also took a toll on two other big U.S. lenders," said the Journal. "Wells Fargo & Co. posted its first quarterly loss in more than a decade and socked away $9.57 billion to prepare for a wave of loan defaults. Citigroup Inc.’s second-quarter profit fell 73%, weighed down by the $7.9 billion the bank set aside for an expected increase in soured loans."
JP Morgan Chase CEO Jamie Dimon explained that the 2020 economic crisis “is not a normal recession.”
"The recessionary part of this you’re going to see down the road," he said.
Whatever stimulus, unemployment and help the Congress can deliver are what is keeping things stable for now.
"JPMorgan’s outlook for the economy has darkened since the bank reported first-quarter earnings, and its increased loan-loss provisions reflect that view," said the Journal. "The bank put aside extra to prepare for unemployment to remain above 10 percent through the first half of next year, said Chief Financial Officer Jennifer Piepszak."
Their models are predicting a wave of mortgage defaults coming up in the next year, particularly if the economy continues to take a hit as the virus resurges and has a second or third wave.
"The biggest portion of the quarter’s provision—$5.83 billion—came from the consumer bank, while $2 billion came from the corporate and investment bank and another $2.43 billion came from the commercial bank," said the Journal. "In the consumer and small-business banking operations, revenue fell 9 percent and the provisions it set aside for loan losses sent it to a $176 million loss. Spending volume on the bank’s credit cards fell 23 percent."
It isn't a promising prediction of the future of the American economy.