- Moody’s chief economist says there are four differences between the current banking crisis and the GFC.
- Those include the scope of the crisis and the US government’s response, Mark Zandy tweeted.
- Zandy told CNN on Monday that Americans shouldn’t worry about bank deposits.
collapse of Silicon Valley Bank New York’s Signature Bank rattled the banking sector, sparking fears of a contagion that could lead to the next global financial crisis.
Both banks were closed after a bank run on deposits. Other local banks.
Zandi commented, view The current banking crisis is different from the situation in 2008.
In a series of tweets on Monday, Moody’s Analytics Chief Economist Mark Zandy said the current banking crisis differs from the Global Financial Crisis (GFC) in four key ways.
1. All financial institutions were affected in the GFC
The current problems are seen in a small number of small and medium-sized banks caught up in the tech sector downturn and cryptocurrency market crash. Zandy tweeted.
“During the global financial crisis, almost all financial institutions, large and small, were caught in a downdraft,” the economist added.
The financial crisis that led to the Great Recession was one of the worst recessions in US history. The collapse of the U.S. subprime mortgage market squeezed liquidity in the global banking system and led to a sharp decline in bank lending.
—Mark Zandi (@Markzandi) March 13, 2023
2. Large-scale reform of the financial sector after the financial crisis
To prevent another major shock to the banking system, the US has implemented major reforms to its financial system. dodd frank lawThis was done to “prevent the excessive risk-taking that led to the financial crisis,” according to the White House archives.
According to Zandi, there are far more regulatory requirements for banks today than they were in the GFC era.
“These reforms will require banks to hold more capital, increase liquidity and participate in stress tests to determine how much capital they need to weather a very bleak economic scenario.”
—Mark Zandi (@Markzandi) March 13, 2023
3. The U.S. government responded swiftly to this crisis
The US government has responded quickly to this crisis by insuring all deposits.On Sunday, just days after the Silicon Valley bank crisis erupted, the Federal Reserve New lines of credit for banks — “This is in stark contrast to the next decision. Lehman Brothers You will fail at the GFC,” added Zandi. he told CNN on Monday Guaranteed deposits mean Americans don’t have to worry about bank deposits.
On September 15, 2008, in the midst of the global financial crisis, Lehman Brothers, a major Wall Street bank at the time, went bankrupt. The final trigger of the global financial crisis — but the economy had Already months into the housing bubble.
And while Congress enacts a distressed asset relief program, we basically need a $700 billion bailout. October 3, 2008and other major regulations such as the Dodd-Frank Act had just been signed by then President Barack Obama in July 2010.
—Mark Zandi (@Markzandi) March 13, 2023
4. The financial background is different this time
Zandi also said the current economic backdrop is very different from that of the global financial crisis.
“The economy is growing strongly right now, there are plenty of jobs and the unemployment rate is very low. housing bust,” Zandi tweeted.
—Mark Zandi (@Markzandi) March 13, 2023
US GDP grew strongly in the second half of 2022, growing at an annualized rate of 2.9% in the fourth quarter of 2022. GDP grew at an annualized rate of 3.2% in the third quarter. The job market remains hot, with nonfarm payrolls in February up 311,000 from a month earlier. The unemployment rate was 3.6%.
during the Great Depression, US GDP It fell 4.3% from its peak in Q4 2007 to its low in Q2 2009. Unemployment rate In October 2009 it reached 10%.