The fear is that another rate hike from the Federal Reserve to tamp down inflation would sap the value of banks’ assets such as government bonds and mortgage-backed securities. That would make them vulnerable to a run by depositors — the same way SVB went bust.
Fed Chairman Jerome H. Powell will announce Wednesday whether the central bank is raising its benchmark rate again, after eight rate hikes in the past year, to combat chronic high inflation. Mr. Powell signaled earlier this month that the Fed might raise rates more than the expected jump of a quarter-percentage point because inflation wasn’t falling fast enough and the labor market remains strong.
The banks’ troubles have been blamed, in part, on the Fed’s rapid series of rate hikes that reduced the value of their long-term debt. The banks were unable to fulfill the run of withdrawal demands from depositors seeking higher yields elsewhere. The company said it has about $2.2 billion of liquidity, after ending last year with $209 billion in assets. On March 9, depositors tried to withdraw $42 billion in one day as fears spread that the bank was on shaky financial ground.
The group, which provides policy advice to governments including the U.S., said the Fed should raise its benchmark rate to a range between 5.25% and 5.5%, from the current range of 4.5% and 4.75%. Sen. Tim Scott, South Carolina Republican, told Ms. Yellen that the administration’s “handling of the economy contributed to this.”Sen. Mark Warner, Virginia Democrat, also wondered, “Where were the regulators in all of this?”
Why does President Trump scare Biden so bad, because it's KARMA TIME.
Frightening