Rather than reforming the financial system for the public good, the U.S. Treasury and the Federal Reserve are going for a scheme where the “too big to fail” banks are being called upon to gobble up the smaller regional banks, leaving the eatable remains of the failed banks to the big banks, and the losses and bailout of uninsured depositors—to the FDIC.
The word is out in the financial media: The banking crisis provoked by the Fed’s interest rate hikes did not end with the takeovers and reorganizations of Silicon Valley Bank, Signature Bank and First Republic Bank, despite the U.S. Treasury and the Fed’s attempt to stop the crisis by “swiftly” organizing the takeovers, and agreeing to bail out all the uninsured bank holders. Two other regional institutions are already collapsing, PacWest in Los Angeles, whose stocks lost 50% in trading on Wednesday evening (May 3), and Western Alliance Bancorp of Phoenix.
The disaster looming is much much bigger and involves not only the smaller banks, but also a global systemic entity worth over $1 trillion in assets, and three other big banks.
According to an article by Ambrose Evans-Pritchard, in the Telegraph (May 2) “nearly half of America’s 4,800 banks are already burning through their capital buffers. They may not be required to mark all losses to market under U.S. accounting rules, but that doesn’t make them solvent. Somebody will bear those losses.”
The article cites Professor Amit Seru, a banking expert at Stanford University saying: “It’s scary. There are thousands of banks under water…. Let’s not pretend it’s only about Silicon Valley Bank and First Republic. Much of the U.S. banking system is potentially insolvent.”
