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Headline: SVB’s European Shockwaves Silicon Valley Brings Disruption to Global Finance
Sub-headline: Rising interest rates have plunged the financial markets into turbulence. Regional banks in the U.S. are facing bank runs while in Europe, Credit Suisse is on the brink. Is a new global financial crisis coming?
By Tim Bartz und Michael Brächer
17.03.2023, 17.46 Uhr
It all began a week ago with the collapse of the Silicon Valley Bank (SVB) in California, a financial institution known in the startup scene, but which most average investors had never heard of before. The bank experienced rapid growth in recent years, but completely misjudged the consequences of the recent interest rate increases and was facing collapse as its panicked clients rushed to empty their accounts
Following a series of emergency meetings, American financial authorities were forced to do something a number of regulatory and liquidation provisions had been designed to prevent: rescue a bank with government help.
Shortly afterward, U.S. President Joe Biden spoke to the country: “Americans can have confidence that the banking system is safe,” he said on Monday. “Your deposits will be there when you need them.”
Despite Biden’s efforts, though, stock markets around the world plunged this week, with bank shares bearing the brunt of the slaughter. Investor trust eroded by the minute, and even German financial institutions, like Deutsche Bank and Commerzbank, saw their stock prices temporarily plummet into the abyss.
They were statements reminiscent of pledges made by other leaders during the last crisis. Then-German Chancellor Angela Merkel told her compatriots: “Your savings are secure.” Mario Draghi, Lagarde’s predecessor at the ECB, was even more dramatic: “Whatever it takes,” were his words.
The situation at Credit Suisse then provided the cherry on top of this troublesome week. For years, the Swiss bank has been stumbling from one homemade scandal to the next. Once a beacon of the Alpine banking industry, the institution burned through billions with bad investments in addition to providing financial services to corrupt politicians, war criminals, human traffickers and drug dealers. In the fourth quarter of 2022 alone, wealthy and concerned clients withdrew 107 billion francs from the financial institution. The exodus has continued this year.
The reader need only look to Gerald D. Suttles, with Mark D. Jacobs ‘Front Page Economics’ of 2010, for a critical analysis, that is not just a relevant history of 1929, 1987, 2008, but of the Political/Economic present!