Dr. Adam Gower argues regulators are deliberately stretching out the financial downturn by extending loan maturities instead of forcing a rapid collapse like 2008. By keeping interest rates above zero, they're spreading distress over months into early 2025, then expect capital to flood back once the Fed cuts rates.
What the regulators are doing, in my humble opinion, is they are flattening the downturn curve. So instead of going off a cliff like we did in 2008, 2009 with marking to market, the regulators are saying extend these loans. They know that interest rates are not going to come back to zero rates. So by extending, instead of having everything collapse all at once by marking to market suddenly, by having everything drop through the floor, flattening the curve. So you will continue to see distress. It will be metered out over the next few months towards the end of this year into the first half of next year. As soon as the Fed reduces rates, which they may well do early next year, there will be a flood of capital to the markets, but it will not
