The U.S. Federal Reserve declared that, at the end of 2022’s third quarter, 722 banks had losses which added up to more than half their total capital. It seems like this is happening because interest rates are going up and causing huge money losses when it comes to investments and lowering tangible equity.
Fed Warns of Banking Crisis
The U.S. Federal Reserve revealed that 722 banks had losses so big in the third quarter of 2022 that they were bigger than half their capital. This news was released to everyone in April but happened back in February. The higher interest rates made the situation worse for these banks, and the Fed is coming up with ways to help them out.
The Fed mentioned that when interest rates go up, it can cause major losses in investments and bring down the amount of money banks have. They also said that at the end of September, 722 banks had huge losses which were more than half of their capital.
31 out of the banks are in a tough spot and don’t have enough money to take out new loans or even sell loans. This means that they will not be able to get these kinds of special benefits from Federal Home Loan Banks and Government Sponsored Enterprises in the future.
Many people spoke about the U.S. banking crisis on social media this Saturday. Some said that things have not gotten better yet, while others argued that it is just starting. Gabor Gurbacs from Vaneck investment management firm gave his thoughts on the matter too.
The Fed had a lot of information that showed bad stuff could happen because of the risky decisions they made with interest rates, but they didn’t tell the government or other people to be prepared. Even though many banks have failed, the Fed’s leader Jerome Powell said the US banking system is still good and safe. He also said everyone affected by Silicon Valley Bank, Signature Bank, and First Republic Bank were all taken care of.
Recently, people like Jamie Dimon, the CEO of JPMorgan Chase, predicted that there will be long-term issues with our banking system. Economist Peter Schiff also agreed and said that a bad financial crisis could be coming soon. What do you think about what’s going on with our banks? Let us know in the comments below!