For those of us weird economic-type geeks, we've been looking for landmarks in the road into this recession, depression, or whatever this turns out to be.
Latest news- noon PDT, 3/19/2023- Zurich-based investment bank UBS has made a deal to buy failing investment bank Credit Suisse, in Switzerland, reportedly for about a billion U.S. dollars. This will help stem the fear of bank failure contagion in Europe, and around the world. Here's the Reuters news report on the deal, from a little over an hour ago.
So here's how I compare this the 2023 Bank Crisis "landmarks" to the 2008 Great Recession:
Bear Stearns/March 2008- 2023 version- Collapse of Silvergate bank about 10 days ago- This "crypto friendly" bank out of San Diego was allowed ot collapse, possibly to send a message to the banking world to stay away from crypto.
Lehman Brothers collapse/September 2008- 2023 version- Silicon Valley Bank collapse- SVB was shut down a week ago, after a two day bank run, and taken over by the FDIC. This was followed in a couple of days by the collapse FDIC takeover of Signature Bank, another "crypto friendly" bank. The FDIC, U.S. Treasury deptartment, and The Fed (Federal Reserve) joined forces to say that depositors will get their money back, and later agreed to pay back those who had uninsured accounts (over $250K per account). Somewhere between 85% and 95% of SVB deposits were not insured. Bank stock shareholders and bond holders expected to lose money, but may get something from the sale proceeds.
AIG problems/Sept. 2008- 2023 Version- First Republic Bank- Days after Lehman Brothers was allowed to collapse in 2008, AIG, a large investment bank, was bailed out, citing a systemic risk to the whole banking system. This is where the "too big to fail" idea was born, or at least popularized. After Silicon Valley Bank and Signature banks were allowed ot collapse a week ago, the top 5 large U.S, banks, and a few second tier big banks, all pitched in, $30 billion total, to deposit in New Republic Bank for 120 days, to help stabilize it. which was also seeing withdrawals and a huge collapse in the stock price.
In the last week, the banks of the United States borrowed 464.9 billion dollars (see article in last post), plus the $30 billion that was loaned to First Republic by the other banks. That's just under a half a TRILLION dollars in loans to try and restore faith in the U.S. banking system.
I think now we will see many more banks, smaller regional banks, that are struggling, and when they reach a crisis point, they will be bought out by larger banks. This makes the overall system less stable in the long run. But that's how things work.
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