“Deja Vu All Over Again”…
Yogi Berra, the great philosopher, had many a quote that made fun of the obvious. This one has been heard by most of you. He is probably more famous for his funny sayings than his baseball career despite winning six MVP awards and ten world series in nineteen professional baseball seasons.
I have been trying to figure out what cycle I’ve been through over the last 35 years of originating mortgages that may compare to this recent period.
If I could predict what is next for all of us, it could be helpful on how to navigate things going forward.
I think I have it.
It took the collapse of Silicon Valley Bank (the second largest bank failure in U.S. history) a couple of weeks ago to finally figure out a close comparable period that some of you weren’t around for or you would like to forget.
It’s the savings and loan crisis from 1989-1992 all over again.
In 1989, the country was well past the Reagan presidency that some see as a golden period in our history. Late in that business cycle, mortgage rates were approaching 10% and by 1990 we were getting an energy shock from entering the Gulf War.
Those rates, together with bad practices in the savings and loan industry (now called community banks), led some banks to close and large amounts of lending capacity curtailed just when the economy needed it most.
Nothing like a good government bailout (Resolution Trust Corporation) and haircuts in commercial real estate values to throttle activity down.
You may not always love your local community bank, but they provide small businesses with “fuel” (credit) in good and hopefully in bad times too. They are truly more important than most give credit to. I’m afraid we will come out of this period with less banks to provide credit which should concern all of us on Main Street.
Berra had other quotes that are fitting for this period and possibly gives guidance for the obvious:
“A nickel isn’t worth a dime anymore.”
This comes to mind due to our recent high inflation rates.
Our leaders and officials have a history book to go by so let’s hope they use it sooner rather than later to get us through this without too much damage.
One last Berra quote is timeless:
“We made too many wrong mistakes”
This one might sum it up best.
