Kofi Mensah The CEO of Blackrock, which is the largest money manager company in the world, has warned that when some major American banks fail, there will be more bank closures and less loan opportunities. He added that now, banks are going to have stricter rules about how much money they need to keep in their accounts.
Larry Fink Weighs in on the US Economy and Banking Crisis
Larry Fink, the boss and chief of Blackrock Company – which is the largest asset manager in the world – recently shared his thoughts about what’s going on with the US economy and how some banks have gone broke. He said these things in a letter he sent to investors this week.
Last week saw the biggest bank failure in 15 years. This was caused when certain banks like Silicon Valley Bank, Signature Bank and Silvergate Bank had too much debt which they couldn’t pay back. First Republic Bank also needed help so 11 other banks gave it some money. In Switzerland, Credit Suisse ran into trouble and got a bailout from their country’s central bank.
There has been a lot of damage caused already, although it’s not clear how bad yet. To protect us from the danger of things getting worse, leaders have taken quick action. But people are still worried about what could happen next. Could money or assets be the second problem to cause bigger problems?
We don’t know if the effects of having lots of money and changing the rules will have similar impacts in different parts of the U.S. banking system as it did before in a savings and loan crisis. It looks like banks probably won’t give out as many loans and that they are going to need more money to stay open.
“In the future, banks might not be able to lend as much money due to the banking crisis. So, people may need to get financing from capital markets instead.” This is what Fink said about the situation.
A Blackrock executive warned that the low rates many years ago might have caused some people to invest in less liquid investments, like stocks, bonds or real estate. But now, these same investors may not be able to get their money out of those investments as fast as they want and could be at risk of having a “liquidity mismatch” due to their leveraged portfolios.
The Federal Reserve wants to keep inflation low and is doing this by increasing rates. Despite the fact that USA’s financial system is much stronger than it was in 2008, the people in charge of dealing with the current crisis have limited power, especially since there are disagreements among people at the highest level of government.
Larry Fink, the CEO of Blackrock, said that when interest rates increase, governments can no longer afford the same levels of spending and debts from past years. He mentioned that the United States has already spent an unprecedented $213 billion in interests on its debt in 2022’s fourth quarter – this is way higher than last year’s amount which was $63 billion.
Now let us know what you think of Larry Fink’s view on economics! Leave your opinion in the comments section below.
