Wall Street celebrities have warned that the Silicon Valley bank implosion could become a ‘canary in the coal mine’, causing further problems for US financial markets. New York Post report.
Bridgewater founder and co-CIO Ray Dalio says SVB’s failure and serious problems at Credit Suisse have stifled investment by the venture capital industry and led to a potential “canary in a coal mine” that “would go far beyond that.” said it is.
BlackRock CEO Larry Fink says the SVB bankruptcy could be the beginning of a “slow-moving crisis” much like the beginning of the savings-lending catastrophe of 1986-1995. I was.
“Easy Money Results”
In his annual shareholder letter on Wednesday, Fink said, “It remains to be seen whether the consequences of early money and regulatory changes will ripple through the U.S. community banking sector (similar to the S&L crisis), resulting in more foreclosures and closures. I don’t know,’ he said.
Fink said the market is now paying for “years of easy money” after a string of rate hikes by the Federal Reserve over the past two years.
The billionaire cites the $1.8 billion loss he reported just before SVB sold its $21 billion bond holdings, suggesting that an “asset-liability mismatch” like the one that happened to SVB’s bond exposure could result in a “second “It could be a domino toppling,” he said. .
“A third domino fall is inevitable,” says Fink.
more backstops, regulations
Dalio said U.S. and other federal regulators may need to intervene with additional backstops beyond SVB, Signature and Credit Suisse and more regulation.
“Looking ahead, it’s likely that it won’t take long for the problem to materialize, and eventually the Fed and bank regulators will act in an outrageous way,” Dalio said in a blog post on Tuesday. will be
“I think the short-term credit/debt cycle is approaching a tipping point from a period of strong tightening to a period of contraction,” Dalio added.
Critics have argued that the Federal Deposit Insurance Corporation’s guarantee of all SVB deposits, even those not covered by FDIC insurance, is effectively a relief that ultimately falls on the shoulders of US taxpayers.
Ken Griffin, CEO of hedge fund Citadel, told the Financial Times this week: “Financial discipline is lost as the government bails out depositors in full.”
Investor Carl Icahn said the SVB’s demise points to a larger problem of lack of corporate leadership and accountability in the US economy.
Asked by CNBC’s Scott Wapner whether he considered bailouts for uninsured depositors a loss of financial discipline, Icahn said, “Our system is crumbling. I have a problem,” he said.
Icahn said restoring trust in the banking system through the SVB bailout would send a message to citizens that they were not responsible for their actions and that the government would step in and save the crisis. increase.
“We can’t make people feel like the country is willing to save them,” said the head of holding company Icahn Enterprises. “Because the government bails you out, that they can spend all the money they want, that they can do whatever they want.”
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