The banking system in America is still not doing great since three major banks fell apart. According to stats, the amount of money people lend out to U.S. banks has decreased a lot- almost $105 billion – over the two weeks at the end of March, and this was the biggest dip ever recorded. Elon Musk (the person who owns Tesla and Twitter) then said that many people are taking their money out of the banks these days, and he thinks it will become more common as time goes on.
Three Banks Collapse in the US
Recently, three American banks closed down – Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank (SBNY). To help out people who lost money due to this, the U.S. Federal Reserve, Treasury and FDIC (Federal Deposit Insurance Corporation) stepped in and gave a special type of assistance called “bail-out”. This ensured customers were not left with any losses.
Recently, banks have been struggling all over the world, which includes institutions like SVB UK and Credit Suisse. A report by Bloomberg said that the last two weeks of March saw the largest drop in loan amounts – ever! The Federal Reserve’s data showed that almost $105 billion was gone during this time period, even though this only goes back to 1973.
Alexandre Tanzi from Bloomberg says that loans were split into three types: industrial, commercial, and real estate loans. Last week, $64.7 billion was taken away from banks, which has been happening for 10 weeks in a row now. There is also a change with Federal Home Loan Bank (FHLB) bond this month as Jack Farley reported a massive uptick in FHLB bond – rising to almost a quarter of a trillion dollars!
The amount of money that banks have asked for in March was a lot more than usual after the Global Financial Crisis. This means banks are trying to get as much money as they can.
Recently, Wall Street Silver (WSS), a popular Twitter account shared a video of economist Peter St. Onge, who said that many people have been transferring their money from banks to money market accounts. WSS tweeted saying that this has been happening because many are worried that the banks might be at risk, which makes things worse for them. After hearing this news, Tesla owner Elon Musk gave a warning about the situation.
“Things will get even faster.”
Elon Musk has been warning people about the U.S.’s banking system several times already. Back in November and December 2022, he said that there might be an economic recession and argued that the Federal Reserve should reduce its federal funds rate. He then shared his opinion that changes made by the Fed would become one of history’s most destructive decisions. After three famous banks in the US failed in March, Elon mentioned that data from the Federal Reserve is slow and suggested reducing interest immediately.
Do you think the recent bank collapses and less money being handed out for loans will have bad long-term effects on the U.S. economy? What do you think about Elon Musk’s warning? Tell us what you think in the comments section below!