Bill Ackman, Jeffrey Gundlach, Mohamed El-Erian and others warn that the banking crisis is far from over.
Chaos has swept the sector over the past two months, causing four lenders to collapse so far.
Here are some of the recent warnings from top-tier investors, analysts, and other experts.
Last week, First Republic Bank became the fourth US lender to collapse this year, prompting a sell-off in regional bank stocks. This prompts top economists and investors to warn again that the banking crisis is far from over.
Big names from Bill Ackman to Jeffrey Gundlach and Mohamed El-Erian have once again raised concerns about the stability of America’s mid-sized banks as PacWest Bancorp became the latest institution to come under scrutiny after it said it was weighing strategic options after an earlier one Effort to raise capital had given up.
The US banking sector has faced heightened uncertainty since the collapse of Silicon Valley Bank and Signature Bank in March, with the recent fall of First Republic Bank and its subsequent acquisition by JPMorgan adding to concerns about the sector’s stability.
Below is a selection of the most recent US banking risk warnings from top-tier investors, analysts and other experts.
Bill Ackman, billionaire investor
“The FDIC’s failure to update and expand its insurance regime has added more nails to the coffin,” Ackman said Wednesday Twitter. First Republic “would not have failed if the FDIC had temporarily guaranteed deposits while a new guarantee scheme was created. Instead, we watch the dominoes fall at great systemic and economic costs,” he said.
“We are running out of time to fix this problem. How many more needless bank failures do we have to watch before the FDIC, the US Treasury and our government wake up?” he added. “We now need a system-wide deposit insurance system.”
Jeffrey Gundlach, CEO of DoubleLine
“Deposits will continue to flow out, I don’t think this is the final chapter of this regional banking problem… I don’t really see what’s going to stop it if the Fed doesn’t cut interest rates,” Gundlach told CNBC’s Closing Bell.
Mohamed El Erian, Chief Economic Advisor to Allianz
“I fear that this may add to the list of unfortunate announcements by the Federal Reserve in recent years that have undermined the Fed’s credibility, undermined its policy leadership/effectiveness and jeopardized its policy autonomy,” El-Erian said in one Thursday tweet. He expressed doubts about Federal Reserve Chair Jerome Powell’s suggestion during a news conference on Wednesday that the worst of the banking turmoil was over.
Paul McCulley, former chief economist at PIMCO
“The economy has slowed down. Inflation is going in the right direction. We have a chronic banking problem,” McCulley told CNBC on Wednesday.
McCulley said the “acute phase” of the banking crisis, with lenders collapsing and Wall Street investors panicking, was beginning to unwind. But the economy is now entering the “chronic phase” of banking troubles as banks, which have suffered huge losses in recent months, are expected to scale back lending, causing credit conditions to tighten and the economy even more keep braking him.
“We have this chronic condition, which I think is a really severe vice for lending on MainStreet,” he warned.
Continue reading: PacWest and First Horizon plunge 40% as banking industry nerves fuel speculation of further consolidation
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