- There are four differences between the current banking crisis and the GFC, Moody's chief economist says.
- Those include the scope of the crisis and the US government's response, Mark Zandi tweeted.
The collapse of $4 and $4 have rattled the banking sector, sparking fears of a contagion that could lead to the next global financial crisis.
Both banks were shut after a run on deposits, which drove fears that $4 could also cause a run on $4.
Zandi's comments adds to $4 that the current banking crisis is $4.
In a series of tweets on Monday, Mark Zandi, the chief economist at Moody's Analytics, said the current banking crisis is different from the $4, in four key ways.
1. In the GFC, all financial institutions were impacted
The problems now occurring are being seen in a handful of small to mid-sized banks that got caught up in the $4 and the $4 $4.
"In the GFC, nearly all financial institutions, big and small, got caught up in the downdraft," the economist added.
The financial crisis, which sparked the $4 was one of the worst economic downturns in US history. The collapse of the $4 market drove a liquidity squeeze in the global banking system and a sharp fall in bank lending.
—Mark Zandi (@Markzandi) $4
2. Massive reforms to the financial sector after the GFC
To prevent another major shock to the banking system, the US implemented massive reforms to the financial system — such as the $4, which was implemented to "prevent the excessive risk-taking that led to the financial crisis," per the White House archives.
There are far more regulatory requirements for banks now than there were during the GFC, said Zandi.
He said that "these reforms require the banks to hold much more capital, be much more liquid and engage in stress tests to determine how much capital they need to weather very dark economic scenarios."
—Mark Zandi (@Markzandi) $4
3. The US government responded swiftly to this crisis
The US government is moving swiftly in response to the crisis this time by insuring all deposits. On Sunday, mere days after the Silicon Valley Bank crisis erupted, the Federal Reserve put up a $4 — which "stands in striking contrast to the decision to $4 fail during the GFC," Zandi added. $4 the guarantee on deposits means Americans shouldn't worry about their bank deposits.
During the global financial crisis, Lehman Brothers, a major Wall Street bank at the time, collapsed on September 15, 2008, acting as the $4 — but the economy had $4.
And while the congress put into legislation the Troubled Assets Relief Program — essentially, a $700 billion bailout — $4, other major regulations such as the Dodd-Frank Act was only signed into law by then $4
—Mark Zandi (@Markzandi) $4
4. The economic backdrop is different this time around
Zandi also said the economic backdrop right now is very different from that of the Great Financial Crisis.
"The economy is currently growing strongly, there are lots of jobs, and unemployment is very low. When the financial system cratered in the GFC, the economy was already 9 months into a significant recession and $4," Zandi tweeted.
—Mark Zandi (@Markzandi) $4
The $4 grew strongly in the second half of 2022, growing at an annual rate of 2.9% in the last quarter of 2022. Third-quarter GDP grew at an annual rate of 3.2%. The job market remains hot, with nonfarm payrolls rising 311,000 in February from a month ago. The unemployment rate was 3.6%.
During the Great Recession, $4 fell 4.3% from its peak in the fourth quarter of 2007 to its trough in the second quarter of 2009. The $4 hit 10% in October 2009.