He argued that in the past, when the Federal Reserve tightened its rate policy, they ended up failing more than 1,000 banks.
Larry Fink, president of the giant BlackRockwarned this Wednesday that, despite the fact that it is too soon to know what the evolution of the banking situation will be, It is possible that this “crisis that lasts forever”.
The sharp rise in rates which was implemented in the United States to curb inflation after years of loose monetary policies, with ultra-low interest rates, is “the price to pay for years of easy money,” he estimated in his annual letter to investors.
As he described, the aforementioned rate hike, in turn, exposed “fissures in the financial system” and so? led to the bankruptcy of SVB bankclose to the technology sector, last week along with two other banks in the United States.
Larry Fink’s Warnings
“It is too early to know the extent of the damage”, said the president of this gigantic portfolio manager regarding the current financial crisis. And he added that “Response from regulators so far has been quick and decisive actions allowed to avoid the risks of contagion”.
In the past, when the Federal Reserve tightened its rate policythey occurred “financial bankruptcies spectacular”, such as the crisis of the American savings banks Savings and Loansthat became “eternalized” in the 1980s and 1990s and led to the failure of more than 1,000 banks.
“We don’t yet know if the consequences of easy money and regulatory changes will reverberate throughout the US regional banking sector.with other takeovers and closures to come,” Fink warned.
In addition, for the BlackRock executive, the entire situation described makes it “inevitable” that many banks must reduce the amount of credit they provide since they will have to strengthen their balance sheets and they will also have to strengthen their demands in terms of capital.
Source: Ambito
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