Bank failures have been in the news a lot lately. Thanks to their business decisions, Silicon Valley Bank, First Republic, Signature Banks, and others have found themselves with many unhappy customers.
Early Monday, federal regulators shut the doors on First Republic Bank, only a few weeks after it had received $30 billion in funds from multiple sources to shore up the solvency of the bank in March. It was then purchased by J.P. Morgan Chase.
Charlie Gasparino, a reporter for Fox Business, has been sounding the alarm from his sources that the worst may be yet to come. He warns that at least a dozen regional banks are “very impaired.”
While the big banks such as Wells Fargo, Bank of America, Citigroup, or JP Morgan have sufficient assets, the regional banks are the most at risk. When the government released tons of money during Covid, banks invested the free money in risky financial instruments—they bought high rather than selling high.
Gasparino laid the blame for the recent bank failures at the feet of Federal Reserve Chairman Jerome Powell along with the policies of the Biden Administration. Government spending, along with inflation, increases in government spending, and ten increases in the Fed’s interest rate since 2022 have all contributed to the bank failures.
The last time interest rates were at current levels was prior to the financial meltdowns experienced in 2008 when similar concerns were voiced by the Obama administration.
Former Treasury Secretary Larry Summers during the Clinton administration and former Obama administration official Steve Rattner wrote warnings of Biden’s inflationary spending in several op-ed pieces in the Washington Post and New York Times.
Treasury Secretary Janet Yellen was also singled out for federal spending and creating a situation where banks took on massive risk and inflation. When you raise interest rates to high levels, the banks have too much negative on their balance sheets.
Gasparino suggests that unless something changes, the regional banks are going to find themselves in serious trouble and may quickly become insolvent.