Michael Burry Reflects on Banking Crisis and Panic of 1907 – Markets Could Bottom Soon – Economics Bitcoin News

Published:

Michael Burry, a hedge fund manager renowned for foreseeing the 2008 financial crisis, has drawn parallels between the current banking turmoil and the Panic of 1907. Burry noted that three weeks after J.P. Morgan made a stand, the panic was resolved and the markets bottomed. “A stand was made this past weekend,” he remarked.

Michael Burry on Bank Failures, Panic of 1907, Markets Bottoming

Famous investor and founder of investment firm Scion Asset Management, Michael Burry, has likened the current financial crisis, following the collapse of multiple banks, to the Panic of 1907. Burry is famous for being the first investor to detect and benefit from the U.S. subprime mortgage crisis that took place between 2007 and 2010. He is featured in “The Big Short,” a book by Michael Lewis about the mortgage crisis, which was turned into a movie starring Christian Bale.

The “Big Short” investor tweeted Wednesday:

In October 1907, Knickerbocker Trust failed due to risky bets, sparking a panic. Two others soon failed, and it spread. When a run began on a healthy Trust, J.P. Morgan made a stand. 3 weeks later the panic resolved & markets bottomed. A stand was made this past weekend.

Knickerbocker Trust Company was one of the most significant trust companies in the U.S. Its failure in October 1907 provoked a financial panic and led to a decrease in confidence in the entire banking system.

The panic came to an end after J.P. Morgan organized a rescue of numerous large banks and encouraged other financiers to do the same. The bailout helped restore trust in the banking system. The Federal Reserve System was subsequently established on Dec. 23, 1913.

Burry’s tweet followed the failure of several leading banks in the U.S. including Silicon Valley Bank and Signature Bank. The former was shut down by regulators last Friday and the latter by the New York State Department of Financial Services a couple of days later.

To prevent bank runs and revive confidence in the banking system, the Treasury Department, the Federal Reserve Board, and the Federal Deposit Insurance Corporation (FDIC) declared measures to permit depositors of both banks to “have access to all of their money.” In addition, the Federal Reserve Board said it will “make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.”

While some people on social media concurred with Burry, several indicated that the Federal Reserve System did not exist in 1907 so the current situation is different.

In a separate tweet, Burry wrote: “This crisis could resolve very quickly. I am not seeing true danger here.” With regards to the U.S. economy, Burry previously warned of another inflation surge and extended multi-year recession in the U.S.

What do you think about Michael Burry’s comparison between the Panic of 1907 and the current banking turmoil? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Recent articles