Since March, the banking industry in the United States is still feeling the repercussions of three major bank collapses. Data from the U.S. Federal Reserve showed that lending contracted by close to $105 billion, the largest decline on record. In the same period, commercial bank deposits were withdrawn from financial institutions, the 10th consecutive weekly decline. At the same time, bond issuance from Federal Home Loan Bank (FHLB) rose to almost a quarter trillion dollars, six times the post-GFC average for the month of March, indicating banks' scramble for cash.
Furthermore, Alex St. Onge, an economist, pointed out that a considerable portion of bank deposits are moving to money market accounts, something that was picked up by Twitter owner Elon Musk who warned “this trend will accelerate”. This is not the first time Musk has voiced his concerns, as he had previously warned of a severe recession in the U.S. and urged the Federal Reserve to drop the federal funds rate. Consequently, the Fed raised the interest rate, causing Musk to comment that the rate hikes could be remembered as “one of the most damaging ever.” After the three bank failures, he called out the Fed's data latency and demanded an immediate reduction in rates.
Ethan Garcia
- 2023-04-09
Impacts of Major US Bank Collapses
Find out about the impacts of the three major bank collapses in the United States, along with relevant data from the U.S. Federal Reserve and tweets from Twitter owner Elon Musk.
