Almost a year ago, I wrote about businesses and their creditors preparing for a possible recession. If we judged the economy solely by the cryptocurrency industry, we would have said it tanked long ago. But we don’t, and here we are, still tiptoeing around the word recession, while job numbers and consumer demand remain fairly strong, the rate of inflation decreases, the stock market fluctuates wildly, and the Federal Reserve hikes interest rates. Many economists are still predicting a soft landing.
Just as true . . . many are not.
I have been associated for thirty years with clients and friends at banks, credit unions, and other financial institutions. I’ve been asking them for the past year if they could feel the anticipated (or not) economic downturn. Most have said no, this just doesn’t feel the same. That could be in part thanks to conservative underwriting and effective special assets groups.
Contrast that with 2008, when we could all feel it in our bones. In addition to watching the market tank, we watched the daily hit parade—Bear Stearns failed, and Lehman Brothers filed for bankruptcy just hours after John McCain declared that “the fundamentals of our economy are strong.” Even before these big events, the pall was heavy.
Are recent bank collapses the beginning of something similar? Does it now feel like things are different? After all, Silicon Valley Bank was the first bank the FDIC has shut down since 2020. It is purportedly the largest bank failure since 2008.
No need to worry, we’re told, as Silicon Valley Bank and Signature Bank were highly leveraged in the struggling tech sector. But is there really no need to worry? Obviously, time will tell, but I’m eager to learn whether my clients and friends now feel it in their bones.
Nonetheless, it remains a best practice to review the financial health of your clients and customers, monitor and control your receivables and installment payments, and create backup plans in the event of defaults. Contact the attorneys at Dalton & Tomich today to protect your business or financial institution and recover what you are owed.
