Former FDIC Chairman: More Bank Failures Likely
An ominous warning was issued Wednesday by a former chairman of the Federal Deposit Insurance Corporation (FDIC).
Speaking to Neil Cavuto on Fox News’ “Your World,” William Isaac declared “there’s probably going to be more failures along the way.” He compared the present financial and political situation with what was endured in the 1970s.
He pointed towards Washington losing control of its fiscal responsibilities and monetary policies. This haphazard leadership, when combined with runaway inflation, creates a mixture that banks are “just not ready for.”
In the 1970s, some 5,000 thrift banks were shuttered. Now, there will be nowhere near that number in the near future, and one reason is that there are not even 5,000 banks remaining.
The U.S. currently has roughly 4,500 banks operating.
Federal regulators stepped in and shut down Silicon Valley Bank (SVB) last week after the institution reported a $1.8 billion loss and its stock price collapsed.
On Sunday, the FDIC along with the Treasury Department and Federal Reserve announced that depositors who held accounts with SVB and Signature Bank will be able to recoup their funds. The second bank was collateral damage after panicked depositors made a run on its holdings.
Isaac told Cavuto that the damage is not over and that “we’ve got some cleanup to do.” He continued to harshly criticize the federal government for what he termed as “awful” fiscal policy.
The former FDIC chair explained that Washington pursued irresponsible policies for 20 years and was joined in ineptitude by the Fed. “We have to get the monetary policy in line with where it needs to be. If we do these things, we can get out of this with minimal damage.”
The aftershocks of SVB’s collapse continue to reverberate across the financial sector. The institution held about $209 billion in assets when it was shuttered, making it the second-largest bank failure in U.S. history.
Its implosion is only topped by the 2008 financial crisis.
When doors and trading reopened on Monday, worldwide banks saw massive declines in their stock prices as investors scurried for safer ground. Further bank failures would be a troublesome sign for an economy already gripped with inflation and runaway government spending.
