US banking woes have triggered deep concerns about a looming recession. The government is doing everything possible to keep the situation under control, but the economy will hardly survive another blow to the banking sector. Banks are not immune to bankruptcy, and with compensation funds depleting one day, there will be no more support for the banking system.
Minneapolis FRB President Neel Kashkari has been one of the first to voice concerns about recession risks. He stressed that the American economy is getting closer to a recession with each new problematic bank. The current situation in the banking sector only fans the flames. Recent banking turmoil and the possibility of a follow-on credit crunch could bring the United States closer to a recession, he told CBS News. The policymaker also added that the US banking system is currently stable and reliable.
The recent collapse of Silicon Valley Bank almost triggered a new global financial crisis. California’s regulators shut down the bank on March 10. The SVB bubble burst, unable to withstand the Federal Reserve’s aggressive policy. Many financial institutions saw a steep fall in the value of their assets, and the collapse of SVB marked the worst financial meltdown in 15 years. Signature Bank and Silvergate Bank filed for bankruptcy in the following weeks.
