After the recent banking collapses in the US, many people believe that more bankruptcies are in the offing following the Federal Reserve’s benchmark interest rate hike by 25 basis points (bps). US journalist Charles Gasparino insists that Wall Street’s “low rate” addicts are ignoring the US banking crisis. Quill Intelligence CEO Danielle DiMartino Booth says the banking industry is facing problems that “no one wants to call a banking crisis.”
Ignoring the US banking crisis
there have been numerous opinions and statements of financial experts and officials following the bankruptcies of three major US banks. All four major benchmark stock indices ended the day in the green on Friday after the Federal Reserve increase the federal funds rate by 25 basis points two days earlier. Journalist, radio host and financial commentator Charles Gasparino wrote an opinion editorial over the weekend stating that “the modern stock market is addicted.” Gasparino believes that the higher rates are “painfully exposing” a “rot within the banking system.”
He adds that commercial bankers have taken “wild bets,” and the failures of Silicon Valley Bank and Signature Bank highlight the problem. “There will be others, up to two dozen, according to what I have been told,” explains Gasparino. “They all have remarkably similar balance sheets to SVB and Signature. If things continue to go south, they are also set to crash, guaranteeing a strong recession.” Coincidentally, a paper published on March 13 by researchers at New York University shows that US banks had unrealized losses of $1.7 trillion in December 2022.
the reporter’s editorial opinion, published by the New York Post, also mentions First Republic Bank, insisting that First Republic “made some of the same horrible portfolio choices as SVB.” Gasparino doesn’t think people should “trust stock trading addicts.” Gasparino likens the recent stock market rally on Thursday and Friday to the “stupefied giddiness of a junkie who just got his fix every time he hears lower rates are coming.” While traders may want lower rates, Fed Chairman Jerome Powell recently stressed that “rate cuts are not in our base case”, and insisted that “inflation is still too high”.
Author and CEO of Quill Intelligence Danielle DiMartino Booth predicts that more bank failures will come too. Position discussed the topic with Kitco News’ main anchor, Michelle Makori, and brought up the issues surrounding the First Republic commercial bank. Booth noted that “we haven’t seen the biggest banks step up,” and many of these troubled banks are “sitting in no man’s land.” Additionally, Booth claims that a precedent has been set after the Federal Reserve, Treasury and FDIC bailed out SVB and Signature.
“A precedent has been set and it cannot be undone,” Booth told Makori. “As regulators, it’s not their job to pick winners and losers, but that’s the corner they (the US government) got into when they backed all of Signature’s and SVB’s uninsured deposits. We are in the middle of a banking crisis that nobody wants to call a banking crisis,” Booth concluded.
What do you think should be done to prevent more banking crises in the US? Let us know what you think about this topic in the comments section below.
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