The current banking crisis has plunged the US economy further into trouble, according to the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari.
Neel Kashkari on US Financial Woes, Banking Crisis, Recession
Federal Reserve Bank of Minneapolis President Neel Kashkari spoke to CBS News Sunday about America’s economic struggles, the banking crisis, and the risk of a looming recession.
When asked if the current banking crisis had pushed the US economy closer towards a recession, Kashkari replied:
It definitely brings us closer. Right now, what’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch.
“That credit crunch … would then slow down the economy,” he added, noting that the Fed is monitoring the situation “very, very closely.”
Major banks including Silicon Valley Bank and Signature Bank have failed in recent weeks, prompting the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation (FDIC) to intervene and protect depositors.
Kashkari was then asked whether the FDIC’s deposit insurance should be increased above the current $250,000 limit, and whether the 2018 rollbacks on the regulation of mid-sized banks should be reversed. The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 had reversed some of the regulations that were implemented following the 2008 financial crisis.
The Fed official commented:
Well, we have fundamental issues, regulatory issues facing our banking system. I have argued for years that the biggest banks in the world are still too big to fail.
He went on to explain that the deposits flowing to large banks and the bailouts of Credit Suisse are due to a “premium position” and an “unfair playing field” that puts pressure on regional and community banks.
“Once we get through this stress period, we have to come up with a regulatory system that both ensures the soundness of our banking system, but it’s also fair and even, so the community banks and regional banks can thrive. We do not have that today,” Kashkari concluded.
Billionaire Bill Ackman has warned of potential permanent damage to smaller banks if the government does not step in to extend their bailout. Ackman recently said, “We are heading for a train wreck.”
What do you think about the statements from the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari? Let us know in the comments section below.
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