Zions, Western Alliance Disclose Bad Loans Tied to Fraud Allegations

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00:00Sally, this concerns two banks, Zions and Western Alliance, and it comes on the heels of a very

00:04solid earnings season for the big banks. That is right. The big banks posted very solid earnings

00:11indeed. But one particular thing that came out of earnings were the comments by JPMorgan Chase CEO

00:18Jamie Dimon. And he was talking about Tricolor, which is this subprime auto lender that collapsed

00:24in dramatic fashion. And Jamie Dimon, JPMorgan actually took $170 million charge tied to

00:32Tricolor. And Dimon said, you know, when you see one cockroach, there are probably more. And

00:38actually, the news today that both Zions and Western Alliance are dealing with problematic loans amid

00:45fraud allegations shows that Dimon was probably right. Probably right. But there's been a lot of

00:50pushback to what Jamie Dimon said, that maybe there are more problems. Because in each instance,

00:54whether it's Tricolor, First Brands, or in this Zions and Western Alliance, bad loans, everyone's

00:59talking about, oh, well, you know, there's fraud, there's bad behavior, there's corporate malfeasance.

01:03This does not mean there's a contagion around the corner. That's right. So after Jamie Dimon made his

01:08comments, which by the way, he didn't mention, you know, private credit, but a lot of private credit

01:14players took it as a shot against them. And actually, I think what Dimon was saying is we have to just do

01:20better due diligence here and make sure that we are very careful about the deals we evaluate,

01:25because this is, you know, this is starting to look a bit like late cycle behavior. Cracks are

01:31starting to show in credit markets. Spreads are very tight. Valuations are very high. And this is the

01:37kind of behavior that you start to see. And both banks need to do their due diligence, as do private

01:42credit firms on the underlying loans. So I'm glad you bring up that late cycle behavior. What does that

01:47mean in terms of demand for the kind of debt that these banks were issuing and demand from the

01:54companies that are looking to borrow? How does that all fit together? Well, I think demand has been

01:59very, very high on both sides. And probably that's what's generated some of the froth. If you have a lot

02:05of demand and you have a lot of supply, it kind of allows for this sort of more, you know, behavior

02:13that pushes the boundaries. Yeah, pushes the envelope a little bit. So let's dig into what

02:17Zions and Western Airlines said specifically. What do we know about the Zions situation and whether

02:22it's contained or not? Right. Well, Zions is seeking to recover about $60 million in unpaid loans. And

02:28they are owed to a subsidiary, which is California Bank and Trust. And they're from two investment firm

02:35funds which are tied to these stakeholders. And actually, California Bank and Trust provided them

02:41with two revolving credit facilities in 2016 and 2017 for their purchase to finance their purchase

02:48of distressed commercial mortgage loans. And actually, Western Alliance, it, you know, it's

02:53actually this investigation prompted Western Alliance similarly to look at the same borrowers

03:00it's having an issue with. So again, it's these borrowers is starting to show that there are cracks in the market.

03:08So again, they're trying to create a lot of waiting for物 reaffirters. And specifically,

03:11starting to make things needed in their own context for all urban restaurants. I think it's

03:15finally the listing that starts studying within the company trying to find two parties's

03:19so many of us will be taken in today's workshop for them. So I take advantage of why these

03:25езд能 in Fair as well. I mean, I have learned clearly how people will be able to stick up

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