Global financial system ignoring President Biden’s call for calm

Crime Scene: Credit Suisse offices at 700 College Rd East in Princeton.

Bank stocks came under more pressure Wednesday as questions surrounding the fate of one of the world’s largest financial institutions, Credit Suisse, spilled over into the broader market.

New fears for the stability of the global financial system rattled financial markets, after Credit Suisse acknowledged it found “material weakness” in its financial reporting, adding uncertainty to the already jittery banking sector in the wake of the collapse of Silicon Valley Bank and Signature Bank.

Silicon Valley Bank, a major lender to the high-tech industry, and Signature Bank each collapsed following a run of depositors withdrawing their money.

Silicon Valley Bank
Silicon Valley Bank closed by the FDIC

The failures at Silicon Valley and Signature were two of the three biggest in U.S. banking history, following the collapse of Washington Mutual in 2008. Both collapses followed the news last week that Silvergate Capital Corp. would wind down.

Signature Bank, Silicon Valley Bank and Silvergate Capital, was counted among the most crypto-friendly financial institutions in the US, despite the revelations that cryptocurrency remains subject to chicanery and fraud exposed by criminal charges leveled against Sam Bankman-Fried after his FTX exchange and Alameda Research trading firm came crashing down in November 2022.

Shares of Credit Suisse were down, pulling the Dow Jones industrial average and the tech-heavy Nasdaq into lower territory, as European banking stocks also tumbled, dragging down the major indexes.

Compounding matters, Credit Suisse’s largest investor signaled that it would not be rushing in with more cash to help buttress the firm.

Credit Suisse has had long-running problems that “do not come as a complete shock to either investors or policymakers,” Andrew Kenningham, chief Europe economist with Capital Economics, said in a research note Wednesday. But the bank has a much larger balance sheet than SVB and is much more intertwined with the global financial system, with many subsidiaries outside Switzerland, he said.

Too-big-to-fail US lenders such as JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. received billions of dollars in recent days.

Bank of America Corp. scooped up more than $15 billion in new deposits in a matter of days, emerging as one of the big winners after the collapse of three smaller banks dented confidence in the safety of regional lenders.

“The top six banks in the US are and have been too big to fail, the financial crisis over 10 years ago demonstrated that,” said Michael Imerman, an assistant professor at the University of California Irvine’s business school. “So it’s safer to go with a name with higher degree of certainty.”

President Joe Biden said his administration was taking steps to maintain a secure banking system and protecting the country’s economic recovery following the collapse of Silicon Valley Bank.

“Today, thanks to the quick action of my administration over the past few days, Americans can have confidence that the banking system is safe,” said Biden, who outlined the steps his administration took to ensure safety of the American banking system after the Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank and Signature Bank.

Referring to the Biden administration’s approval of a disastrous environmental assault in Alaska and the banking crisis, presidential contender Marianne Williamson said, “From the Willow Project to the Silicon Valley Bank collapse to the chemical train derailment in East Palestine—there is one thing calling out for us to do: Disrupt the system.”

Russia is so cut off from the international financial system that the Kremlin thinks Western sanctions have ‘insured’ the country against a potential banking crisis.

“Our banking system has certain connections with some segments of the international financial system, but it is mostly under illegal restrictions from the collective West,” said Kremlin spokesperson Dmitry Peskov, referring to sanctions against the country over its invasion of Ukraine one year ago.

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