Federal Reserve Board Member Says ‘500 Or More Banks In The USA Will Fail,’ FDIC Says 52 Are On Danger Shortlist

Scott Rechler, an active member of the board for the Federal Reserve of New York and is the chairman and chief executive officer of RXR, which is one of the largest owners, managers, and developers of real estate and infrastructure in the New York metropolitan region, gave this revelation last week in a whitepaper that was seen exclusively by Fortune.

In his paper how regional banks will face a “slow-moving train wreck” due to real estate loans maturing over the next several years, especially small and regional banks, which he says will ultimately cause them to shutter their doors and can be a “systemic issue.”

I think there’s going to be…500 or more fewer banks in the U.S. over the next two years. I’m not saying they’re all going to fail, but they’re going to be forced into consolidation if they don’t fail.

They don’t have a business model that’s going to enable them to stand alone, and be competitive, and retain deposits and service customers the way that they have.

I think when you hear the Treasury or the regulators talk about, ‘Well, with real estate, this isn’t a systemic issue,’ I think they’re really focused on the large systemically important, too-big-to-fail banks. But when you look at the regional banks around the country, they have a significant allocation of their loans to commercial real estate. A lot of it to multifamily developers that are going to have loans that are upside-down.

He wrote.

Fortune added: ‘Rechler went on to describe the dreaded “doom loop” that many regional banks may face. As Fortune previously reported, if depositors start to worry that regional banks with excessive CRE exposure could be in trouble, they may begin withdrawing funds…