Silicon Valley Bank sudden collapse sent shockwaves through the financial system prompting
regulators to take control of the bank in order to stem fallout from the panic.
No way.
The series of events that followed the bank failure,
roiled global markets sparked federal investigations and is forcing the Federal Reserve
to rethink the next steps in its inflation fight.
WSJ markets.
Reporter Gu Engine Banerjee explains how the week unfolded
as worries of bank runs spread on Sunday.
Federal regulators took control of a second bank signature making it the third
largest US bank failure ever after Washington Mutual and SBB
Regulators said customers of both banks would be able to get all of their money back.
We are concerned to bet depositors and are focused on trying to meet
their needs.
They were trying to bring stability to the financial system at a time when people were worried about
will these bank failures ripple throughout the entire US.
Economy.
Regulators created a new lending program for banks called the bank Term Funding
program which allows banks to take advances from the fed to meet customer withdrawals.
We saw the stock market,
stock futures rise on Sunday but a lot of that enthusiasm
quickly disappeared.
Monday morning,
President Biden sought to restore confidence in the financial system during a televised address before
us markets opened.
Thanks to the quick action of my administration over the past few days,
Americans can have confidence that the banking system is safe shares.
The first Republic bank plunged and other regional bank stocks suffered their largest decline in
three years as Wall Street scrambled to assess the likelihood of further fallout.
People are worried,
will the stress that we saw at Silicon Valley Bank or signature bank will that spread
to other regional banks?
On Tuesday,
the labor department's consumer price index showed that inflation eased in February but
still remained high at 6%.
This underscored the challenges facing the fed as it balances stabilizing the banking
industry while also fighting rising prices the same day,
the Wall Street Journal reported that the Justice Department and the Securities and Exchange Commission are
investigating the collapse of SVB in separate probes.
One thing in particular that they're looking at is executive stock sales ahead
of the bank failure.
Swiss Bank credit Suisse and other European banks saw its shares hit lows on
Wednesday as worries about the financial system spread across the Atlantic.
So now people are wondering how bad is this going to get?
Is it going to spread across the globe?
And and that was really the worry throughout the week in the US.
First Republic stock tumbled as well as its credit rating when S and P global ratings
downgraded to junk status,
citing its elevated risk of deposit outflows and profitability measures.
After credit Suisse said it would borrow up to $53 billion from the Swiss Central bank to shore
up its liquidity shares of the troubled bank rose on Thursday.
First republic shares also turned positive as 11 banks swooped in to rescue the
beleaguered lender with a $30 billion financial lifeline.
They don't want first Republic's pain to spread to the broader economy to spread throughout the
entire financial system because that's,
that's not good for Jpmorgan.
That's not good for Bank of America and it may not be good for us.
Consumers,
Treasury Secretary Janet Yellen,
who is in discussion with bank executives about that deal told lawmakers that the U S financial
system remains healthy.
I can reassure the members of the committee that our banking system is sound
and that Americans can feel confident that their deposits will be there when they
need them.
On Friday,
Silicon Valley Bank's parent company filed for bankruptcy.
The largest stemming from a bank failure since Washington Mutual in 2008.
Now there's gonna be a court supervised process to find owners of the parts
of SVB financial business that aren't Silicon Valley banks and Silicon Valley
Bank is already under federal control.
Questions hung over the economic outlook before SVB failed.
Now,
volatility at other lenders is testing banking business and consumer
confidence people were so worried about a recession going into this year.
People have been wondering what's going to crack as the Federal Reserve starts raising interest rates.
But I can tell you no one saw this coming.