The bank crisis threatens to spark a credit crunch as Main Street banks pull back
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Phil Rosen
Mar 29, 2023, 17:20 IST
Spencer Platt/Getty Images
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Around $1 trillion in deposits have been pulled from smaller and mid-sized banks since the Fed began hiking rates last year, with half that fleeing banks since SVB collapsed.
After SVB's collapse, he added, regional banks could see a sizable drop in deposits, and tightening lending standards will impact all kinds of borrowing.
This likely could impact the trajectory of the economy, as regional and community banks are a massive source of credit to Main Street borrowers.
Banks with under $250 billion in assets account for 45% of all consumer lending, according to Goldman Sachs, while 43% of the $5 trillion worth of commercial loans sit with mid-sized banks.
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Housing, too, is in a state of flux as mortgage rates hover near multi-decade highs and home prices stay elevated.
Though there's been some debate as to how the SVB collapse will impact prospective buyers, the market is undeniably slowing.
At present, home prices now are in their longest slump in over a decade, according to Case-Shiller data released Tuesday.
"Just how much prices will rise from winter lows will depend on whether mortgage rates stabilize and creep downward or stay high and volatile," Zillow senior economist Jeff Tucker wrote in a note yesterday.
What other implications on lending do you anticipate from the recent bank turmoil? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2.US stock futures rise early Wednesday as worries about a banking crisis continue to ease. Meanwhile, a second hearing on the collapse of SVB will be held today before the House Financial Services Committee. Here are the latest market moves.
3. On the docket: Spotify, Next PLC, and more, all reporting.
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4. Morgan Stanley recommended this batch of stocks to prepare for an unexpected earnings drop. Investors should brace for a downturn and more market volatility, chief investment officer Mike Wilson explained. These are the 32 names on his list.
7. Silicon Valley Bank was a "textbook case of mismanagement," the Federal Reserve's Michael Barr said. In a statement at his Tuesday Congressional hearing, the central banker warned that SVB's failure could lead to a tightening of banking rules to prevent similar incidents. Get the full details.
9. The world's largest wealth manager is warning investors to avoid stocks for the rest of the year. UBS downgraded equities, and said buyers shouldn't let a big opportunity in the bond market go to waste before rates come back down. Read the firm's full advice across asset classes.
10. A Russian official said the country has successfully rerouted all the oil it would have sold to the West to "friendly" nations. Nikolai Shulginov, Russia's energy minister, implied that Moscow has offset the impact of sanctions aimed at curtailing export revenue. He maintained that Russia will continue to focus on sending commodities to allies.
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