The United States economic system is often categorised as “too big to fail” by the common public, however, recent incidents have reported the failure of major US banks driving the US, or rather global economy. Economists believe this to be the first step towards a recession considering that share prices of US regional banks such as Comerica and Zions Bancorp have experienced a -50% and -56% share price move as of March 1, 2023, respectively, which was also the beginning of the crisis.
The Silicon Valley Bank was the first to face closure caused by high interest rates. This resulted in a widespread of investors to retract their investments from small regional banks to invest in comparatively safer banks such as JP Morgan America and American Express. Along with the Silicon Valley Bank, the First Republic Bank and Signature Bank also experienced closure between March and April of 2023. The core issue of this was listed as the constant hike in interest rates made by the US central bank. The Silicon Valley bank was a major lender to aspiring business startups and had venture capitalists as its clients that had already deposited large amounts to it. These failures are the biggest hits to the US economy after the 2008 recession and the record inflation rates of the country are also to blame. The Federal Reserve of the US has been aggressively increasing rates since March of 2022 which has led to a drop in the market value.
While the position of these regional banks has now stablisied, the current US bank data shows that over $1trillion of bank deposits are currently uninsured, which creates a doubt that the US banking crisis is not over yet.
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