A tense situation in US banking has increased fears that the next economic crisis is at the doorstep. Stock markets ended the week down as investors continued to sell shares of mid-sized banks.
According to US media, the Justice Department has launched an investigation to determine the causes of Silicon Valley Bank’s collapse. At the same time, government officials are trying to reassure the public that the banking system is resilient.
“Our banking system is strong, and Americans can be confident that their deposits are there when needed,” emphasised Treasury Secretary Janet Yellen.
However, many Americans are still worried. Pouring more oil on the fire is the $30 billion cash injection by major US banks to save California-based First Republic Bank.
“Is this a long-term solution? I don’t think so. Are there other companies that a larger systemic issue may affect? Quite possible,” pondered a stock trader.
“Ultimately, I decided to close the account. I didn’t have much money in there, but it’s still money. Especially for a retiree,” said First Republic Bank customer Paul.
Fears of a possible economic crisis have grown, fuelled by the tense situation in stock markets throughout the week. Investors continued to sell shares in the banking sector. Mid-sized banks, in particular, fell out of favour.
“These are banks whose deposits totalled $50-250 billion and wanted more lenient regulations. Now, however, this may come back to bite them,” explained CBS News economic editor Jill Schlesinger.
Analysts do not rule out the possibility that other threats may be lurking in the financial system. Especially in less regulated corners like real estate and private equity.
The escalating concerns in the US banking sector, particularly surrounding mid-sized banks, have intensified fears of a potential economic crisis. With stock markets ending the week down, government officials attempting to reassure the public, and analysts identifying possible threats in less regulated areas like real estate and private equity, it remains uncertain what the future holds for the stability of the US financial system.