Banks kicked off the quarterly earnings season today and some posted record numbers, but in their own words that does not mean the economy is in good shape.
The worst effects of the recession are still coming, they say, and while JP Morgan reported some of their best numbers ever, the two are actually related.
The world's largest investment bank says the worst effects, and shortcomings in their own balance sheets, have been delayed by stimulus measures from Congress and the Federal Reserve. But those stimulus measures won't last forever.
“This is not a normal recession. The recessionary part of this you’re going to see down the road,” JPMorgan Chief Executive Officer Jamie Dimon said Tuesday. “You will see the effect of this recession. You’re just not going to see it right away because of all the stimulus.” [...]
But even buoyant markets couldn’t halt the pain from the new economic reality prompted by the U.S.’s failure to contain the spread of coronavirus in ways other nations have. JPMorgan now expects the unemployment rate to remain above 10% for all of 2020, and fall only to 7.7% by the end of next year.
“I don’t think anybody should leave any bank earnings call this quarter simply feeling like the worst is absolutely behind us and it’s a rosy path ahead,” Citigroup CEO Michael Corbat told analysts. “We don’t want people leaving the call simply thinking the world is a great place and it’s a V-shaped recovery.”
It's not a "V-shaped recovery" the banks themselves say while Trump's White House insist it is.
You'd like to think congressional Republicans would take this into account as Congress negotiates another stimulus package that should be passed in the coming weeks, but they've shown no signs that they're listening.
Between them, JP Morgan, Citibank, and Wells Fargo have reportedly set aside $47 billion for a wave of bad loans and mortgages they expect to see in the coming months according to Bloomberg. That's more than the last three years combined and the most since the 2008 financial crisis. But even so, the GOP is still opposed to renewing the $600 per week pandemic unemployment program that helps people pay their bills and they have not supported a national moratorium on evictions or other measures that may halt a wave of defaults.
Call me cynical, but I think Republicans would be delighted if they could delay the inevitable just long enough so that the current status quo of financial limbo collapses right after Biden takes office early next year.
If I'm wrong and they don't agree to pass appropriate stimulus in the coming weeks, it will collapse before the election. Up to 28 million people could lose their homes by September unless Congress acts.