On Sunday, New York bank regulators shut Signature Bank. Trading was suspended Friday in the stocks of several small banks whose share prices plunged on fears they were in the same situation. SVB had to sell $21 billion worth of bonds at a fire sale, taking a $1.8 billion loss. If depositors can demand their money back anytime, then using their money to buy long-term bonds is risky. Banking’s first rule is that assets should match deposits. Now she says she’s monitoring several banks “struggling with the whiplash in prices” of their bonds.įinancial experts warn smaller banks are in for a rough ride, though the big banks like JPMorgan Chase, Bank of America, Wells Fargo and others are not apt to be in trouble.Īdmittedly, SVB’s managers made mistakes. Apparently, the hordes of bureaucrats working under her are also too busy with diversity, equity and inclusion seminars to prevent banks from failing.Īs the SVB crisis unfolded, Yellen was MIA. Yellen has been an outspoken activist for climate change, women’s rights and diversity, including appointing the Treasury’s first ever racial equity officer. The Office of the Comptroller of the Currency, a part of Yellen’s Treasury, is responsible for examining the financial condition of banks. Chairman Martin Gruenberg also cautioned that the diminishing value of the bonds held by banks meant a $620 billion problem ahead. A day before Yellen’s loony speech, Federal Deposit Insurance Corp. Those rapid rate hikes, the most drastic in decades, made the banks’ bonds lose value.Ī week before Yellen’s climate change harangue, Moody’s Investors Service already had delivered bad news to SVB that it was about to be downgraded several notches because its inventory of bonds was not worth enough to repay depositors. In 2022, after doing nothing to tame inflation the previous year, the Federal Reserve hiked rates repeatedly to make up for their previous inaction. She was heedless to the impending downfall of SVB and possibly several other small banks that had purchased long-term bonds when interest rates were near zero. Weather is a risk, but she was oblivious to the much more immediate problem facing banks - the plummeting value of the bonds they own.
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