🚩Over the past two months several regional banks have announced mergers or merged.

This validates our thesis that regional banks are under tremendous financial strain and OPERATIONAL risks.

Culprits: ABS, CRE and autos.

Here are the list of banks:🧵 1. $FITB acquires $CMA for $10.9 billion in an all-stock deal. This merger is expected to create the ninth-largest bank in the U.S..

🚩Tricolor and First Brands bankruptcies are not one-off.

They’re connected signals of deteriorating collateral that can propagate into non-performing loans and broader auto ABS underperformance across the chain.

Here is our analysis and insight from our sources.🧵 1. What just happened?

Sept 25–26, 2025: A cluster of First Brands–linked financing entities (under the “Carnaby” umbrella) filed Chapter 11 in the Southern District of Texas, signaling acute stress and pushing First Brands loans into the 30s.

🚩“The United States of America is never going to default, that is never going to happen” - U.S. Treasury Secretary Scott Bessent

The above statement was uttered by the US Treasury Secretary to “calm the markets.”

WE (America and Americans) are addicted to DEBT
- a thread🧵 1. It is certainly not unheard of for a Treasury Secretary to raise the topic of default. For example, in 2023, Janet Yellen said that the U.S. should never default on its debt. The consequence of such an event, she warned, would be “an economic and financial catastrophe.”

🚩We have a problem in the credit market.

We reviewed the Q1 2025 Investment Grade (IG) credit and analyzed the Q2.

We found that IG credit, sector by sector, is eroding. - a thread 🧵 1. The net rating bias (positive minus negative outlooks) was below zero in nearly every sector.

Translation? More names were put on downgrade watch than upgrade watch.

- Over 60% of sectors saw an increase in negative outlooks.

Here’s where the cracks are showing:

🚨Nearly 160 companies will lay off employees throughout June, exceeding the approximately 130 companies that did so in May.

Here are the upcoming layoffs in June 2025- a thread🧵 1. We have been tracking the corporate defaults, downgrades and bankruptcies.

- The layoffs in June will affect multiple industries, including retail, pharmaceutical, food and beverage, airlines, package delivery and more (WARN)

- Layoffs in the workforce vary by company, with some laying off between one and 25 employees; other companies, like U.S. Cellular, have larger cuts planned.

🚨 The most overlooked aspect of the Big Beautiful Bill is the changes to the Supplemental Nutrition Assistance Program (SNAP).

- The ripple effects of SNAP will lead to job losses in $WMT and other retailers.

- A segment of consumers will get sucked into the blackhole of economic nothingness - never to recover.

- a 🧵
@m3_melody @JG_Nuke @thejobchick 1. Major changes are introduced to SNAP in H.R.1 – and we have analyzed the companies that will be impacted the most and the consumers who will be pushed below the poverty line.

🚨 Nearly 452,000 defaulted student loan borrowers are Social Security recipients.

- Social Security garnishments are happening. It is about to push a huge chunk of people below poverty line.

🚩We found a private contractor who prefers the defaulters to stay in default - a depressing thread🧵 1. Older borrowers have become the fastest-growing group in the student loan portfolio, which has led to a rising share of defaulters being Social Security beneficiaries. From 2017 to 2023, the number of student loan borrowers aged 62 and older ballooned by 59% (from 1.7 million to 2.7 million), even as the number of borrowers under 62 slightly declined.

🚨 A Leveraged Nation with a sub-standard living for Consumers.

- The prime auto loan ABS is deteriorating rapidly - a downgrade is imminent.

- A considerable chunk of consumers feel that homeownership is out of reach.

- a thread🧵 1. For a moment, let us forget politics and the stock market. Let us purely focus on the welfare of the people and that of our country as a whole. We are in deep economic trouble. The United States is facing an economic identity crisis.

We want to state the obvious yet overlooked fact: The United States and its citizens are heavily in debt.

🚨 The Systemic Risk Lurks in Private Credit (Shadow Banks). - a thread🧵

🚩The signs of economic distress are often first visible in the credit markets, such as difficulties with loans and financial defaults.

In contrast, the equity market lags in reflecting these issues.

We are at the cusp; where extreme swings are a norm. 1. Frothy stock markets occur when investors become overly excited about companies (such as SPACs and AI-driven tech valuations) and are overly focused on the potential upside. Frothy credit markets are when people stop worrying about the downside (think of ‘extend and pretend’ in CREs*, auto loan, BNPL, etc).

🚨 Prime Auto Loan Deterioration. Fitch expects an imminent rating downgrade.

- According to Fitch, some ABS pools are facing liquidity issues. ABS market is deteriorating.

- Impending Credit Risk in the ABS markets With Focus on multiple Shadow Banks.

- a thread 🧵 1. You can review some of our work on shadow banks here: substack.com/home/post/p-10…

and here: contrarianunicus.substack.com/p/the-weekend-…

🚩All you need to know about May 5, 2025 student loan resumption.

#3 details the percentage of garnishments.
#4 when the garnishment begins.. and it is not May 5.
#5 offers links for other options.

- a refresher thread 🧵

For a detailed thread check our earlier post:

https://x.com/UnicusResearch/status/1915127920642699646

1. Student loan garnishments for defaulted federal loans begin on May 5th.

- FSA will restart the Treasury Offset Program, which allows the govt. to withhold federal payments, such as tax refunds and SS benefits, from borrowers in default.

- The Department will also authorize guaranty agencies that they may begin involuntary collections activities on loans under the Federal Family Education Loan Program.

🚨By the end of 2025, nearly all subprime consumers (30%) will be CREDIT DEPRIVED.

🚩BNPL and student loan defaults are the culprits.

- a detailed thread 🧵on BNPL Live Credit Reporting. 1 (a)🚩BNPL firms have begun reporting consumers' real-time usage to credit agencies.

- Consumers are trapped in debt forever and tapped out of credit.

- BNPL users are using their credit cards to payoff their BNPL loans. Sadly, exact data is not available.

- A 2024 study by the Federal Reserve found that 71% of BNPL users revolved on their credit cards in 2023, compared to 40% of non-users.

- between 2020 and 2023, the average credit card utilization rate among BNPL borrowers remains notably high, between 60 and 66 percent.

🚨 The student loan repayment resumption is expected to significantly shrink consumer credit availability for prime and subprime consumers.

The 2020 student loan forbearance and the upcoming reality shock for the consumer credit...

- a detailed thread🧵 1. A combination of higher interest rates, higher debt levels, inflation/affordability issues, and the resumption of student loan payments - a perfect storm for American consumers.

Consumer distress is spreading to higher credit score and income cohorts. We expect this to impact consumer discretionary spending.

🚩 The Death of Consumer Affordability - a thread🧵

“The price level from all 2025 tariffs rises by 2.3% in the short-run....Annual losses for households at the bottom of the income distribution are $1,700.” 1. According to the new report by the Yale Budget Lab, the hit to the regular American families’ pocketbook will be significant - as much as $3,800 annually.

🚨 The unregulated, unreported, and unsecured shadow bankers and predatory lenders, like, BNPL, are a problem.

BNPL might be on its way to replace traditional credit cards. It is also risky. Here is why- a🧵 1. In the event of $AFRM's earnings beat, we thought of sharing this.

Fast Facts on BNPL:
- Consumers an option to pay in four or five installments.
- Low default rates compared to credit card.
- defined as zero-interest loans repaid in four or fewer installments.
- Not reported or tracked by any credit bureaus
- yes we checked with them.
- If the customer default or delayed payments on BNPL, the BNPL hands over the account to a collection agency. Now, that will impact the credit.

🚨 Trump to hit Canada and Mexico with 25% tariffs on Saturday. Is it a bluff?

If not, the US consumers will be in deeper trouble. Food, gas prices will spike if the US levies 25% tariffs on Canada and Mexico.

Here is how it will impact the US consumers- a thread🧵 1. According to Wells Fargo, Mexico and Canada are two of the United States’ top trading partners. Aside from the European Union, comprised of 27 sovereign nations, Mexico is the largest source of all U.S. imports.

🚨 Dealerships are quietly closing without warning, OEMs are denying responsibility, and customers are stuck paying for cars they do not have.

Dealership bankruptcies have begun. Expect more in 2025 - a thread🧵 1. We have been researching auto sector over the past year. Speaking with dealers across the United States revealed that dealers are quietly shutting their dealerships. Only a few incidents are reported in the main stream media.

🚨 Nothing makes sense because banks, dealers, and OEMs refuse to accept the reality and do not want to be the first to blink....and the bond holders are holding the bag.

Here is how a systemic risk is unfolding as prime and subprime auto ABS losses are rising- a thread🧵 1. Auto loan delinquencies are spiking.
Serious delinquencies on US auto loans are skyrocketing. Auto loan 90+ day delinquency rates are now 2.88%, the highest since Q2 2010. The percentage has almost doubled in just 2.5 years.

🚨 Auto Sector Implosion: Higher prices, lower quality cars, high negative equity, longer months and higher delinquencies across the board - a detailed thread🧵 1. Roughly there are 276M vehicles on the road, of which, 32% are associated with auto loans and leases.
There are nearly $1.56 B auto loans+ $61B auto leases.

(Source: Experian)

🚨 $STLA layoffs more employees across the U.S. triggers ripple effect, and $ALLY is a ticking time bomb - and consumers are not O.K and are in deep trouble- a thread🧵 1. Wednesday: $STLA indefinitely laid off more than 1,100 workers at Jeep plant in Ohio.

Friday: $STLA cuts 400 plus jobs at Detroit parts warehouse.

🚩 $STLA is one of the most terribly managed publicly traded companies in the world.

Dealerships that are carrying $STLA's inventory are folding - a thread🧵 1. Stellantis stuffed over-priced inventory onto the dealers and is refusing to offer decent rebates to push the metal off the dealer lots. Recently, the dealers confronted the CEO, Carlos, and the management’s response was, “Deal with it.”