FameEX Hot Topics | Anticipated Increase in US Bank Failures Due to Interest Rate Hike and Unresolved Banking Crisis, Say Experts

Following the recent failures of three major US banks, financial experts and officials are warning of further bank failures in the country due to the interest rate hike and unresolved banking crisis. Charles Gasparino, journalist, radio host, and financial commentator, wrote an opinion piece stating that the "modern-day stock market is an addict." He believes that higher rates are exposing a "rot inside the banking system" and that there will be more bank failures, as many as two dozen, due to balance sheets that are similar to those of Silicon Valley Bank and Signature Bank.

According to a recent paper published by researchers at New York University, US banks had unrealized losses of $1.7tn in December 2022. Gasparino compared the recent stock market rally to the "stupefied giddiness of a junkie" and warned people not to "trust the addicts trading stocks." Danielle DiMartino Booth, author and CEO of Quill Intelligence, also foresees more bank failures, particularly regarding the commercial bank First Republic. Booth noted that many troubled banks are "sitting in no man's land," and the precedent has been set after the Federal Reserve, Treasury, and Federal Deposit Insurance Corporation bailed out Silicon Valley Bank and Signature Bank. She warns that regulators should not pick winners and losers, but they have backed themselves into a corner by supporting all of the uninsured deposits of these failed banks.

Despite the recent interest rate hike by the Federal Reserve, all four major benchmark stock indexes ended the day in the green on Friday. However, Powell, the Fed chair, recently stated that rate cuts are not in the base case, and inflation remains too high. As the banking crisis continues, financial experts and officials remain cautious about the stability of the US banking system and the possibility of more bank failures.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.