Will the SVB crash affect the entire US economy?

The US Treasury said there was no risk to the overall banking system that could trigger a repeat of the 2007-08 financial crisis.

Matthew Rasling

WASHINGTON, March 16 (Xinhua) — Following the failure of Silicon Valley Bank (SVB), the question on everyone’s mind is whether the problem will spread.

US media, analysts, and ordinary Americans are speculating whether there will be a crackdown on banks or a major impact on the US economy.

Some analysts believe the SVB collapse is a warning of future problems.

Desmond Lachman, a senior fellow at the American Enterprise Institute and a former staff member of the International Monetary Fund, told Xinhua that as the US Federal Reserve battles inflation with high interest rates, “other than defaults, the We will see many cases of

These “will put strain on the financial system in general and the non-bank financial sector in particular,” Lachman said.

“The bottom line is that the actions of the Fed and Treasury after the SVB will stop cracking down on banks in general. Stated.

The US Treasury said there was no risk to the overall banking system that could trigger a repeat of the 2007-08 financial crisis.

The department took emergency measures Sunday night to guarantee deposits for bank customers. Financial regulators have also closed another financial institution they thought might fail, Signature Bank.

Larry Kudlow, former director of the US National Economic Council, told Fox Business News on Monday: I know how difficult and truly heartbreaking the widespread bank meltdown is in 2009, especially for ordinary households and blue-collar workers. ”

“No one wants the stock market to crash or the banks to crash. So, like you, I hope this Silicon Valley banking crisis is over, but I think government officials are doing it in 2007 and 2008. I didn’t like the word “contained” that I kept saying throughout the years. They are saying it again now.

“They’ve all taken action. Will this stop the bleeding?” Kudlow said, referring to the government’s emergency measures. “I honestly don’t know.”

In fact, many local bank stocks have plunged in recent days. “It’s not good,” said Kudrow.

Mr Lachman said:

In fact, many tech startups have very easy access to funding and loans, despite the lack of profit prospects for years to come.

Technology companies often operate on the premise of growth rather than profit. But times are tough for tech companies as the Federal Reserve is shutting down funding.

Additionally, many tech stocks are trading at dramatically inflated values, creating a bubble that many analysts say is waiting to burst.

Marc James, 41, a salesman in the Washington DC suburbs, told Xinhua News Agency that he has invested heavily in the technology sector over the past five years.

He knew there was a bubble, but “got greedy” and ignored it. His portfolio is now down by nearly 50% of his.

The SVB case will likely only make the tech market worse, he said.

Experts say much of the problem lies with the Fed.

“By pursuing an overly accommodative monetary policy earlier, the Fed has created both inflation problems and bubbles in asset prices and credit markets,” Lachman said.

Now that the Fed has been forced to aggressively raise rates to deal with inflation, “based on the assumption that interest rates will remain low forever,” “there is a risk of bursting a bubble in the asset and credit markets,” Lachman said. Stated.

Before its bankruptcy, SVB was the 16th largest bank in the United States and had been in business for 40 years.

The lender was a subsidiary of SVB Financial Group. In terms of deposits, it was the largest bank in Silicon Valley.

The crisis began suddenly when the bank announced the sale of US$21 billion in securities and said it needed to raise US$2.25 billion to support its customers’ withdrawal and lending needs.

The news sent the bank’s stock price plummeting, creating the ripple effect of exits from venture capitalists. One day, bank stocks plummeted by 60% of his, and bank stocks in the world cost him $80 billion.

The crisis is reviving the ghosts of the 2007-2008 financial crisis that rocked markets to the core and caused a massive global recession.

Some analysts say things are different this time. SVB isn’t as big as the so-called “too big to fail” financial institutions that tumbled at the time. Some people take a wait-and-see attitude.