With the bailout-buyout of First Republic by JP Morgan over the weekend, the prospect of a general banking crisis is being taken more seriously by the markets.
PacWest tanked 42%; Western Alliance plunged 27%; and Metropolitan Bank fell 20%. Comerica and Zion Bancorp followed the pack, both down nearly 10%. The KBW regional banking index, which tracks smaller regional banks, fell 7%. Markets are finally waking up to the fact that a large portion of the banking system is potentially insolvent - around half of it, by some measures.
The banking system is insolvent due to reckless central bank policy.
Following the last financial crisis in 2008-09, central banks engaged in wild monetary experiments including quantitative easing, which drove interest rates down to record lows.
The bank failures themselves not only drove up the price for risky assets like those just mentioned, but also the price on riskless assets.
The recent use of bailouts and assisted buyouts may become increasingly difficult as more banks come under pressure.
After the last financial crisis, central banks around the world engaged in an unprecedented monetary experiment.
https://unherd.com/thepost/bailouts-wont-prevent-a-financial-crisis/
No comments:
Post a Comment