Wall Street has been worried about bad debts for weeks. Now these fears are spreading

Several financial groups are struggling with bad loans, raising concerns on Wall Street about more to come.

For weeks, investors have focused on Jefferies Financial Group, an investment bank that has at least $45 million in exposure to First Brands, an auto parts supplier that filed for bankruptcy last month.

But on Thursday, they turned some of their attention to two regional banks, Western Alliance Bancorp and Zions Bancorp, following concerns about some of their loans as well.

Shares of all three banks suffered their biggest one-day losses in more than six months on Thursday. That anxiety played out in the market as a whole as well, with the Dow losing 0.65% that day. Meanwhile, investors flocked to safe havens, including U.S. Treasuries, gold and silver.

If all this reminds you of the regional banking crisis of 2023, you’re not alone. As of now, it is unclear whether there is a risk to the market as a whole or whether these are just a few bad eggs.

Jefferies, like several other financial groups, offered financing to First Brands through third-party factoring, which is when a company promises to repay lenders when one of its customers pays an outstanding balance.

But creditors say First Brands used the same invoice multiple times to access funds from private lenders who were unaware of the double-dipping. Translation: Lenders like Jefferies might not have provided financing to First Brands if they had a more complete picture.

In total, Jefferies’ $45 million exposure to First Brands represents less than 5% of its pretax profit last year, meaning its exposure to First Brands alone is unlikely to lead to its closure.

Jefferies CEO Rich Handler and Chairman Brian Friedman highlighted this in a statement released earlier this week aimed at calming investors.

But investors appear more concerned about whether Jefferies missed warning signs in this case, which is reportedly under investigation by the Justice Department for potential fraud, and whether it missed similar signs elsewhere. The company declined to comment.

What is going on between the Western Alliance and Zions?

Both stocks fell more than 10% on Thursday following revelations that they had lent to companies they say defrauded them.

Sions (ZION) said in a filing with the Securities and Exchange Commission on Wednesday that it expects to lose $60 million as a result.

Western Alliance (WAL) did not indicate how much it expects to lose. Instead, it said in a document filed Thursday morning that it “initiated a lawsuit alleging fraud on the part of the borrower.” Because of this, she said she now has more loans at risk of default.

Representatives for Zions and the Western Alliance did not respond to CNN’s requests for comment.

As Jamie Dimon, CEO of JPMorgan Chase, said this week, before details were revealed about Zions and the Western Alliance: “When you see one cockroach, there are probably more.”

And JPMorgan isn’t entirely clear either. It is about to take on $170 million in bad loans to Tricolor, another company that declared bankruptcy last month. JPMorgan is the country’s largest bank, and lawyers representing the directors of bankrupt Tricolor have alleged that the company was involved in fraud, Bloomberg reported.

But the question is: how many other cockroaches are there?

Correction: An earlier version incorrectly stated the status of Tricolor’s bankruptcy case. Lawyers representing the company’s directors have reportedly accused the company of fraud.