| Apollo Global Management CEO Marc Rowan doesn't see First Republic Bank's collapse as a systemic risk, but he does think three bank failures within eight weeks raises another big question: "What's the business of regional banking going forward?" Speaking in a Bloomberg Television interview from the sidelines of the Milken Institute Global Conference in Beverly Hills, Rowan said, "So you're now the CEO of a big regional bank—your costs of funds is up, your regulatory costs are up. Can you lend money?" For Anne Walsh, chief investment officer for fixed income at Guggenheim Partners Investment Management, the answer is clear: "This means they will lend less." Of course, it's a question right at home at this conference. Years ago, the Beverly Hilton was the original location for the "Predator's Ball," the annual gathering of corporate raiders, private-equity moguls and Michael Milken's dealmakers at Drexel Burnham Lambert. They all knew a lot about risky debt markets, which are in the spotlight again. Right now, there are about 4,000 banks in the US, and some are them are carrying debts that could turn toxic. Rowan is concerned about commercial real estate. His top economist, Torsten Slok, estimated in March that small banks had issued about 70% of all commercial real estate loans that were outstanding. So even with Jamie Dimon and JPMorgan Chase & Co. coming to the rescue of First Republic Bank, it's hard to believe the whole sector is out of the woods. Rowan isn't alone in his worries. Katie Koch, the CEO of TCW, one of the country's most respected bond fund managers, thinks the economy is likely headed for a "hard landing," or a deeper recession than many big banks are anticipating. She is concerned about how smaller banks' struggles will affect not only commercial real estate but smaller corporations. "Small businesses rely on small banks, and that's a big problem, a very, very big problem," Koch said in a Bloomberg Television interview. "Half of Americans are employed by small businesses." She predicts a credit crunch will hurt job creation. Meanwhile, the big are getting bigger. JPMorgan, the nation's largest bank, absorbed First Republic, one of the top 15 US lenders. Citigroup CEO Jane Fraser is among those who think more banking deals will follow. She said on Monday in a panel moderated by Bloomberg's Stephanie Flanders that the US financial system is fundamentally sound, and, in her opinion, just a handful of banks were poorly managed. However, Fraser also warns that a significant tightening of credit conditions could be a drag on the economy. She still sees a lot of pent-up demand and expects the US would pull out of a recession pretty quickly. More from my interview with Fraser: For a full report of today's events, Bloomberg has you covered here. | 
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