Chris Whalen Talks Finance

Summary

Podcast Summary: Chris Whalen Talks Finance

Podcast: Bloomberg Talks
Host: Bloomberg (Nathan Hager and Karen Moscow)
Guest: Chris Whalen, Whalen Global Advisors
Date: October 17, 2025

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Overview

This episode features a candid conversation with Chris Whalen, a respected financial analyst and head of Whalen Global Advisors. The discussion centers on the current state of the American financial system, systemic risks reminiscent of past crises, concerns over liquidity, the effects of governmental fiscal policies, and issues in the housing market. Whalen brings a historical perspective, skeptical insights, and practical recommendations for investors during a time of heightened uncertainty and structural shifts in finance.

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Key Discussion Points & Insights

1. Parallels to Past Financial Crises

• Repeating Past Mistakes: Whalen draws direct parallels between current market practices and the pre-2008 environment.
  • Double Pledging & Collateral Issues: Laxity in loan structuring reminiscent of Bear Stearns era.
  • Quote: "If you don't have a trustee to hold the paper, then you have double pledges of collateral. Remember Bear Stearns? ... It's called fraud." (Chris Whalen, 00:57)
• Investor Disadvantage: Market terms increasingly favor issuers, putting investors at risk.

2. The Brewing Contagion

• Nature of Contagion (2025): Problems are building on the commercial (as opposed to consumer) side of banking.
  • Regulators and industry are "walking past a graveyard;" masking unresolved issues in sectors like private equity and commercial real estate.
  • Accounting Changes: New rules "pretend the loan was never modified" if payments resume for a year.
  • Quote: "We've just changed the accounting rules for loan modifications, by the way. So if it pays for 12 months, we pretend the loan was never modified. How cool is that?" (Chris Whalen, 01:46)
• Consumer Side Quiet (for Now): Consumer loan losses are low, but this could change next year.

3. The "Debasement Trade" and Investor Strategy

• Shift Away from Government Securities: Investors fear growing deficits and currency debasement, looking to alternatives like gold.
  • Whalen's Advice: Keep 10–15% allocation in gold.
  • Concerns About the Dollar: Structural U.S. problems will likely weaken the dollar further.
  • Quote: "I've been telling my readers to put at least 10 to 15% of their total allocation into gold for most of this year... people are worried about deficits... and I think they're right to do so." (Chris Whalen, 03:00)

4. Liquidity Fears and the Federal Reserve

• Liquidity is "Highly Compartmentalized": The Fed's reliance on GDP as a liquidity gauge is outdated and misleading.
  • Drawing a parallel to the December 2018 tightening, Whalen warns current conditions are precarious and not fully appreciated.
  • Quote: "Liquidity is highly compartmentalized. It does not flow one way and another. So you really don't know until there's not enough..." (Chris Whalen, 04:59)
• Balance Sheet Shrinkage: Questioning the logic behind the Fed's current quantitative tightening and its risks.
  • Whalen Suggests: Ask Fed Governor Waller if he knows "where the ground is now"—a metaphor for flying blind on policy outcomes. "We're landing in the fog. We don't have an altimeter. Where is the ground? Does he know? That's the key question." (Chris Whalen, 05:35)

5. Profitability & Competition in Modern Banking

• Big Banks Not Significantly More Profitable: Returns barely above 1%; banks are returning capital due to lack of lending demand.
  • Growth in deposits outpaces loan demand; banks lend more to non-bank financial institutions.
  • Emergence of many alternatives to traditional banks via equity markets and private credit.
  • Quote: "Asset returns are barely 1%. They are giving back capital because they're underutilized... there are so many alternatives to traditional banks now... you have plenty of places to go spawn." (Chris Whalen, 06:29)

6. The Housing Market: Affordability and Inventory

• Affordability Crisis: Mortgage rates remain high, and home prices are up 50% since 2019; it's a major problem for young buyers.
• Market Correction Predicted: Whalen sees a major home price reset ("maxi reset") in 2028, with refinancing opportunities for those holding high-rate mortgages.
  • Reference to policy plans from Trump and Bill Pulte to "goose" the housing market.
  • Quote: "If you've got that high coupon mortgage, wait a little bit and maybe go into a floater and then you'll be able to refinance it much lower in a couple of years." (Chris Whalen, 07:38)
• Shortage Depends on Location: Severe in blue states like New York due to limited building, whereas over-supply exists in southern states.
  • Quote: "Here in New York, in the blue states where we don't build. Yes... down south, we have the opposite problem in the Carolinas and Texas, Florida, we are up to our earlobes and supply." (Chris Whalen, 08:21)

7. Whalen’s Upcoming Work

• Recent and Future Books: Second edition of Inflated is out with an introduction by David Kotak, and a new book on gold is in the works for next year. (08:50)

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Notable Quotes & Memorable Moments

• On Risk and Transparency: "The industry, the regulators are all walking past a graveyard..." (01:46)
• On Policy Blindness: "We're landing in the fog. We don't have an altimeter. Where is the ground?" (05:35)
• On Housing Market Correction: "I think we see a maxi home price reset in 2028." (07:38)
• On Market Alternatives: "There are so many alternatives to traditional banks now that have been spawned in the equity markets... plenty of places to go spawn." (06:29)

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Timestamps for Key Segments

• 00:57 — Repeating mistakes from 2006: collateral fraud and weakening investor protections
• 01:46 — Accounting gimmicks, brewing commercial banking trouble, and masking loan issues
• 03:00 — Debasement trade: gold vs. government securities amidst deficit worries
• 04:28 — Liquidity fears and the Fed's misjudged models
• 05:25 — The "altimeter" metaphor and the risks of Fed policy
• 06:29 — Modern bank profitability and competition from non-bank finance
• 07:19 — Problems in housing affordability, rising rates, and forecasted corrections
• 08:21 — Regional differences in housing supply and shortages
• 08:50 — Whalen's new book announcements

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Conclusion

Chris Whalen delivers a sobering assessment of the American financial landscape, highlighting overlooked systemic risks, policy blind spots, and significant shifts in banking and housing. He advocates vigilance, diversification (notably into gold), and skepticism toward both regulatory and market optimism. Listeners come away with a nuanced view of unfolding vulnerabilities and sage advice on navigating an era marked by both high asset values and rising undercurrents of instability.

Transcript

[Karen Moscow]

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[Chris Whalen]

Bloomberg Audio Studios Podcasts Radio.

[Nathan Hager]

News Chris Whalen is definitive on the American financial system. I'm standing or surrounded by dinosaurs in Houston and I'm going, I think I got Chris Whelan in a couple of days. Must listen for Global Wall Street. He joins us now. I can't say enough about his value to the American financial system, his history, his books and also his work at Whaling Global Advisors. CHRIS I'm just going to cut to the chase. First Brands Tricolor have we live in 2006?

[Chris Whalen]

Chris Whelan yeah, we're kind of repeating the same mistakes. You know, if you don't have a trustee to hold the paper, then you have double pledges of collateral. Remember Bear Stearns?

[Nathan Hager]

Yeah, I'm familiar.

[Chris Whalen]

Same, same thing. So it's called fraud. And you know, the terms on a lot of deals in the past 10, 15 years have loosened in favor of the issuers to the disadvantage of investors. And First Brand is a case in point.

[Nathan Hager]

CHRIS whalen, there was no other question at my CFA meeting in Houston. No other question. What's the contagion? You're expert at the history of this. Come on, is it like Continental Illinois? Is it like Bear Stearns, as you mentioned, What's a contagion factor in October of 2025?

[Chris Whalen]

It's, it's brewing. We won't really see it until we do. So the commercial side of the equation is where the problems are for the banks right now. They are trying to hide them as best they can. We've just changed the accounting rules for loan modifications, by the way. So if it pays for 12 months, we pretend the loan was never modified. How cool is that? And I think that the industry, the regulators are all walking past a graveyard because private equity, commercial real estate, all of these sectors are still having significant problems. On the other hand, the consumer is quiet. We've been releasing reserves and reducing provisions for loan loss on the consumer side because there's nothing happening yet that may come next year. But the commercial side is where the action is right now.

[Karen Moscow]

TOM Chris, I've learned a new term, I guess in the last few weeks, and that is debasement trade. Where is my understanding is investors are saying I'm worried about all this government spending around the world, so maybe I don't want to own government securities like currencies Maybe even the government debt, and that includes the US Stuff. Maybe I'll buy some other stuff like gold. What do you make of that?

[Chris Whalen]

I've been telling my readers to put at least 10 to 15% of their total allocation into gold for most of this year. And I think it's only beginning to start for the simple reason that there isn't a lot of deliverable supply in gold. People are worried about deficits. They are worried about the dollar and I think they're right to do so. The dollar is probably going to continue to go down. We have structural problems in this country. You notice Chairman Powell is talking about continuing to shrink the balance sheet. Why? As Bill Nelson at Bank Policy Institute wrote this week, the fed funds market may collapse thanks to the big balance sheet. So we have a lot of issues in the background. So the markets look great, AI Everybody's still making tons of money, but in the background people are worried because when you have these all time highs, one after another, they tend to not be confirmed after a while.

[Nathan Hager]

For global Wall street worldwide, on YouTube, across all of our audio product, Christopher Whalen joins us. His one volume on the American financial system. My book of the year ages ago. We're begging him. He's going to put a book DiCaprio scheduled.

[Karen Moscow]

Oh, I got him signed up.

[Nathan Hager]

Continue with Chris Whalen.

[Chris Whalen]

Chris.

[Karen Moscow]

Chris, talk to us about liquidity in the marketplace. And I'm thinking about not so much the stock market, but just kind of across the fixed income space, maybe the currency space. Is that a worry for you?

[Chris Whalen]

Yes, very much so. It's almost like we're back to December 2018 when Jerome Powell almost ran the ship aground. You recall they pivoted very quickly in January of 19 and started easing. That's when they went to this ample reserve policy that they've had since then. And I think that what we're worried about is that the model that the Fed uses to judge whether liquidity is adequate or not is based on gdp, which has nothing to do with anything.

[Nathan Hager]

Right.

[Chris Whalen]

Liquidity is highly compartmentalized. It does not flow one way and another. So you really don't know until there's not enough because I think that's where we are today.

[Nathan Hager]

Chris, I got to get two things in here. It's too important. Sweeney's lined up. Sweeney's got notes this morning for Chris Whalen. I have Christopher Waller tomorrow. What is Chris Whalen's question for Governor Waller, a presumptive chairman? What's your question?

[Chris Whalen]

Whalen, he was very bullish on shrinking the Balance sheet earlier this year. Ask him how he feels now. Ask him where the ground is now.

[Nathan Hager]

I don't have to work.

[Chris Whalen]

We're landing in the fog. We don't have an altimeter. Okay. Where is the ground? Does he know? That's the key question.

[Nathan Hager]

Brilliant. We'll try to get to that again. You're going to see that in the 9 o' clock hour tomorrow with Christopher Wall in his speech at the Council on Foreign Relations. And then I will grill him as best I can. He's really quite, he's, he's a prodigious intellect, folks, particularly in the game theory of central banking. Okay, Chris, let's go to it right now. I suggest that the major banks led by JP Morgan and Bank of America literally are hiding how profitable they are in the Whalen history. Back to Grandpa Whale, great, great Grandpa Whale, Alexander Hamilton a few years ago. Chris Whalen, describe the profitability of this modern era of ginormous big banks.

[Chris Whalen]

I'm not sure that they're that much more profitable today than they have been in the past. Asset returns are barely 1%. They are giving back capital because they're underutilized. Why are they lending all this money to non bank, non depository institutions? Because loan demand otherwise is pretty slack. You know, deposits are growing twice as fast as demand for loans. So hopefully when rates fall we'll see volumes pick up a bit like last September. This September too, by the way, is going to turn out to be a very good month for banks and non banks. But you know, bottom line is that there are so many alternatives to traditional banks now that have been spawned in the equity markets and are funded with equity and debt that you have plenty of places to go spawn.

[Karen Moscow]

Yes, exactly.

[Nathan Hager]

Waylon would say spawned. Private credit was spawned.

[Karen Moscow]

Exactly. So get, get your thoughts on the housing market broadly defined here. That affordability issue continues to be a huge, huge issue for people, particularly young people. I got a mortgage rate, still got a six handle out there and I've got. Housing costs are up 50% since 2019. This is a problem, isn't.

[Chris Whalen]

Is, but it's a problem that's going to be fixed. Donald Trump is going to goose the housing market with his friend Bill Pulte. They want to support home builders at a time when the home builders have already got too much inventory, supply has caught up with demand. And remember the prediction of my good friend Stan Middleman, the founder of Freedom Mortgage misery on the 8th, I think we see a maxi home price reset in 2028. If you've got that high coupon mortgage, wait a little bit and maybe go into a floater and then you'll be able to refinance it much lower in a couple of years.

[Karen Moscow]

So, Chris, I guess the question is there seems to be a housing shortage in this country. I'm not sure how we got there. How do you think that happened in.

[Chris Whalen]

Some parts of the country? Not everywhere. Here in New York, in the blue states where we don't build. Yes. Is astounding to me because this is a market that had very poor volumes before COVID but the prices keep going up because nobody's building houses. Right down south, we have the opposite problem in the Carolinas and Texas, Florida, we are up to our earlobes and supply.

[Nathan Hager]

Michael Barr wants equal time. Chris Whelan, quickly here. Every Brady undergraduate wants to know, when's a new book come out?

[Chris Whalen]

Well, the second edition of Inflated is out, of course, and I did that for you. David Kotak did the introduction, by the way.

[Nathan Hager]

Very cool.

[Chris Whalen]

And we're working on a gold book for next year, which will be very good.

[Nathan Hager]

He'll probably talk to Ikea Green. That's the way Chris Whelan rules. Christopher Whalen, thank you so much. I, I can't say enough, folks, the importance of his skepticism about some of the verbiage of our financial system.

[Karen Moscow]

Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.

[Nathan Hager]

And I'm Nathan Hager. Each morning we're up early putting together.

[Karen Moscow]

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[Nathan Hager]

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[Karen Moscow]

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