but there is no panic from Lehman Brothers-Corriere.it

The fire is limited, not sedated. And the underground sources that feed it have been identified, but have neither been reached nor removed. This banking crisis that emerged in the United States with the failure of Silicon Valley Bank (Svb) does not have the systemic nature of the disaster that started in 2007 with subprime mortgages and extended the following year to the big names on Wall Street. There are no terrible credit losses like in those days, at least not now. That at least this is the prevailing impression is demonstrated by the fact that yesterday the main New York stock exchanges, S&P500 and Nasdaq, moved in slightly positive territory: there is no systemic collapse panic and America does not relive the crash of Lehman, definitely not now. The big oligopolistic banks are no longer surrounded by suspicion, from Jp Morgan, to Bank of America, to Citigroup, to Wells Fargo, Goldman Sachs and Morgan Stanley. This doesn’t feel like a 2008 remake. Yet the fire is burning. And neither the Federal Reserve nor the US Treasury have yet managed to eradicate it.

After all, it is not difficult to understand why. Especially in the years of Donald Trump in the White House, from 2017 to 2019, many constraints on American regional banks have jumped. They do not have the liquidity requirements to keep available that European banks observe and often clearly exceed (for example, Monte dei Paschi travels twice as much as requested, Intesa Sanpaolo one and a half times and even Unicredit far above the thresholds). Nor do smaller American banks have a periodic supervisory review, as in Europe: it is enough for them to evaluate themselves and then write to the authorities. With this background and years of zero rates urging everyone to take more and more risks, now that the Federal Reserve’s monetary tightening arrived it was only a matter of time. Inconsistencies have emerged: years ago Svb had blocked customer deposits in public securities on which it was at a loss; at the first wind of distrust, it did not have the liquidity to avoid going bankrupt. The point now is that it’s probably not an isolated case, nor is it enough of what the Fed and Treasury did Sunday night to make it so.

The market said it clearly yesterday, devastating First Republic Bank and Western Alliance stocks by up to minus 84%, PacWest Bancorp by up to minus 80%, and treating Zions Bancorp, Regions Financial and Charles Schwab in a slightly less brutal way. Everyone tries to smell where the next walking corpse is. logical, given the insufficiency of the institutional response so far. The Treasury has announced that it will cover all deposits – even beyond the maximum insurance threshold of 250 thousand dollars, even those of unwary billionaires undeserving of a bailout – but only of the two banks already blown: Svb and Signature. And the Fed has opened a loan desk where it funds banks at full value even against government bonds whose price has fallen, so they will always have liquidity for their customers. But not much of a prospect if a depositor knows that he will only be entitled to all of his money after his bank fails: he will keep rushing to withdraw it sooner. And it’s not a great prospect for a bank to turn to the Fed’s emergency help desk (bank term funding program) if it knows that an aura of suspicion will surround it on the market.

So the bleeding of many smaller banks continues. And not healthy. Not even for Europe, where institutions are better supervised, more liquid and have strong capital. The Unicredit stock lost 9% yesterday, yet it rose 49.5% from the beginning of the year and now there are those who are selling to cash in. Deutsche Bank lost only 4.7%, but in 2023 already by 7.3%. EU ministers and commissioners yesterday underlined the differences with America to reassure. Total silence instead came from the vital institution. The one usually noisier and more cacophonous, the ECB. It is very likely that he will raise rates by 0.5% as announced on Thursday, while the Fed will cut by half to 0.25% or cancel its next rate hike. But certainly the monetary tightening of the two is now starting to bite and it shows. Not a catastrophe. Maybe just the beginning of a recession.