Part 4/14:
Similarly, Western Alliance disclosed that it was also exposed to these same fraudulent borrowers, with potential losses still unfolding. Given the size of their total lending portfolios—tens of millions against over $7-8 billion in total assets—such losses, while seemingly modest in isolation, set off alarm bells because they symbolize deeper, systemic issues.
Why Such Small Losses Cause Market Turmoil
Surprisingly, the market reaction was disproportionate. The initial drop of around 13% in these banks’ shares was followed by partial rebounds within hours. Why?