UH-OH: Moody’s Is NOT Buying Biden’s Claim That Everything Is Fine In The Banking Sector
The assurances we are getting from team Biden are being contradicted by Moody's
Joe Biden came out on Monday to blame Trump for yet another crisis hitting this administration while claiming he is here to save the day.
To be fair, the collapse came from a liquidity crisis. They had a Diversity Equity and Inclusion officer (hired in 2020) but the role of Chief Risk officer at SVB went unfilled for months.
The liquidity shortage probably wasn’t helped by this decision in January, 2022…
In simple terms, SVB had all the assets they required, but those assets could not be used when they were needed because they has been locked into long-term, low-yield investments that were simply not keeping up with inflation.
When SVB took measures to get more cash on its balance sheet, investors saw that as a serious red flag and got spooked, pulling out the money and compounding the problem.
Trump didn’t choose their asset classes, nor was he involved in the decisions that led to current inflation levels. Biden has given us assurances about how this problem will be contained.
“We’ll do whatever is needed” to prove “our banking system is safe,” Biden said.
“I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again,” –Forbes
Moody’s does not share that confidence.
“We have changed to negative from stable our outlook on the US banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s said in a report.
The move followed action late Monday, when Moody’s warned it either was downgrading or placing on review for downgrade seven individual institutions.
The moves are important because they could impact credit ratings and thus borrowing costs for the sector. — CNBC