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Powell Warns of Bank Failures Due to Commercial Real Estate Losses

Federal Reserve Chair Jerome Powell warned that some banks could fail due to their exposure to the declining commercial real estate sector, exacerbated by the shift to remote work. He clarified that the banks at risk are smaller and medium-sized, rather than the large banks considered "systemically important" after the 2008 financial crisis. Powell stated that the Fed is working with these banks to ensure they have sufficient capital and liquidity to manage potential losses. He also noted the impact of remote work on downtown office districts and related retail businesses. Despite the challenges, Powell expressed confidence in the Fed's ability to contain the fallout and prevent a broader crisis. Read More.

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Countdown to Crisis: U.S. Faces $175.3 Trillion in Unfunded Social Security and Medicare Liabilities

The unfunded liability for U.S. Social Security and Medicare has reached $175.3 trillion, a figure that dwarfs the combined GDP of all countries on Earth ($104.5 trillion) and the total federal spending since the Constitution was written in 1787. The last significant reform to address this issue was 41 years ago, and without action, Medicare is expected to start cutting benefits in seven years, with Social Security trust funds depleting in ten years. In 2013, the unfunded liabilities were $128 trillion, and in just a decade, they have increased by nearly $50 trillion (39%). The Treasury estimates $215.7 trillion will be spent on Social Security and Medicare payouts over the next 75 years, with only $137.4 trillion expected in collections, leaving a $78.3 trillion funding gap. Options to bridge this gap include increased borrowing, higher taxes, and reduced benefits, all of which are politically challenging. The largest portion of the unfunded liability comes from Medicare Part B ($99.5 trillion), which covers basic healthcare services. The "infinite horizon" model, which accounts for an individual's entire life, reveals even larger funding gaps, with current and future participants expected to use $175.3 trillion more than they contribute in taxes. Medicare and Social Security are supposed to be self-sustaining, funded by payroll taxes, premium payments, and taxes on large payouts. However, spending has exceeded revenues since the 1970s, and the situation is worsening. Reasonable bipartisan reforms to address the issue include fixing mistakes in payments, establishing a more organized immigration system, and grandfathering benefits while capping them for future participants. Read Now.