“The US banking system is sound and resilient,” the Federal Open Market Committee said in a statement.
The heart of the stress of the banking system — Silicon Valley Bank, Signature, and First Republic — “have now all been resolved.”
Hours after these statements were delivered to the public, two more banks could be on the brink of failure: PacWest Bancorp and Western Alliance.
In after-hours trading, PacWest cratered 53 percent, and Western Alliance plummeted 22 percent.
Yikes.
So, what’s going on?
The regional banks are collapsing and they are assessing their strategic options, including possible sales.
From CNBC:
“The regional bank is assessing options, including a possible sale, and bringing in advisors to evaluate longer-term plans for the business, CNBC confirmed, according to one person familiar with the matter. Piper Sandler and Stephens are the two firms advising PacWest, the person said.”
Indeed, PacWest could fail by the weekend and see its carcass scooped up again by the likes of JPMorgan Chase.
The small- and mid-size banks are in a world of hurt right now and it is going to be hard for them to stay afloat without significant assistance or bailouts.
But don’t worry.
President Joe Biden and Fed Chair Jerome Powell have informed everyone that the banking system is safe and sound, despite three of the four largest bank failures in U.S. history happening in less than two months.
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