More U.S. Banks Collapsing
This is a very bad sign. Can Biden fix this?
After the failure of Silicon Valley Bank (SVB), Moody’s Investors Services, which is responsible for assigning credit ratings, has placed a number of banks under review for a possible downgrade.
This is a very bad sign. Republicans speculated that SVB collapsing was just the tip of the iceberg and it appears that they were right.
According to Fox, on Friday, due to a bank run, the Federal Deposit Insurance Corporation (FDIC) declared the closure of Silicon Valley Bank. This decision has sparked apprehension regarding the possibility of future bank failures.
As a result of the collapse of Silicon Valley Bank, Moody’s has initiated a review of several banks including First Republic Bank (FRC), Zions (ZION), Western Alliance (WAL), Comerica (CMA), UMB Financial (UMBF) and Intrust Financial. This implies that these banks are now perceived as higher risk investments by lenders.
The firm explained in their report, “Today’s rating action reflects First Republic Bank’s high reliance on more confidence sensitive uninsured deposit funding, its high amount of unrealized losses in its available-for-sale and held-to-maturity securities portfolios, as well as a low level of capitalization relative to peers.”
“If it were to face higher-than-anticipated deposit outflows and liquidity backstops proved insufficient, the bank could need to sell assets, thus crystallizing unrealized losses,” Moody’s added.
Moody’s has further noted that these banks possess considerable deposits that exceed the FDIC’s insurance limit of $250,000. Remember people, the FDIC will only give back up to $250,000 guaranteed. There is no telling what will happen to the money of customers who invest more than $250,000 into these banks.
President Biden has told the American people that this will be fixed but everything appears to be getting worse at the moment.
