In the wake of the recent bank failures in the United States and the Federal Reserve’s 25 basis point (bps) increase in the benchmark interest rate, many believe more failures are on the horizon. U.S. journalist Charles Gasparino argues that Wall Street “low interest rate” junkies are ignoring the U.S. banking crisis, while Danielle DiMartino Booth, CEO of Quill Intelligence, says the banking industry is “facing a banking crisis that no one wants to call a banking crisis. She asserts that we are facing a problem that “we don’t want to call a banking crisis.
ignoring the U.S. banking crisis
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There have been numerousopinions {/netabare}opinions and statements{/25} from financial experts and government officials following the collapse of the three largest U.S. banks Friday, all four major benchmark stock indexes ended the day in the green following the Federal Reserve’s was up cut the federal funds rate by 25 basis points two days ago. Journalist, radio host, and financial commentator Charles Gasparino wrote an op-ed over the weekend arguing that “the modern stock market is an addict.” Gasparino believes that rising interest rates are “painfully revealing” the “corruption inside the banking system.”
Also, commercial banks have taken “wild gambles,” and the failures of Silicon Valley Bank and Signature Bank highlight this problem. Gasparino explains, “There are probably others, I’ve heard of 20 or so. ‘They all have balance sheets very similar to SVB and Signature. If things continue to get worse, they are ready to go bankrupt. Coincidentally, 37} paper {/netabare}{/netabare}{/netabare}38} U.S. banks had $1.7 trillion in unrealized losses in December 2022, according to apublished by researchers at New York University onDecember 13.
Reporter’s 47} Opinion Editorial {/netabare} in the New York Post also mentions First Republic Bank, claiming that First Republic “made the same terrible portfolio choices as SVB.” Gasparino believes that people “trust addicts who are trading stocks. We should not.” Gasparino likens the recent stock market rally on Thursday and Friday to “the stunned giddiness of an addict who just got a drug every time he hears that interest rates are coming down.” Traders may want interest rates to fall, but Fed Chairman Jerome Powellhas been stressed out lately {/53} argued that “a rate cut is not in our base case” and that “inflation remains too high.”
Danielle DiMartino Booth, author and CEO of Quill Intelligence, also assumed more bank failures. Booth with Kitco News lead anchor Michelle Makori on the issues surrounding commercial bank First Republic. Booth noted that he has “never seen the biggest banks get up and running,” and that many of these troubled banks are “sitting on no man’s land.” Additionally, Booth asserted that the Federal Reserve, Treasury, and FDIC bailed out SVB and Signature, setting a precedent.
Booth told Makori, “A precedent has been set, and you can’t undo it.
“As regulators, it’s not our job to pick winners and losers, but by supporting all of Signature and SVB’s uninsured deposits, [the U.S. government] has put itself in that situation. We are in the midst of a banking crisis that no one wants to call a banking crisis,” Booth concluded.
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