Opinion: The Federal Reserve eliminated banking reserve requirements in March 2020 — setting the stage for Silicon Valley Bank to collapse.
SVB served startups with millions of dollars. Even though SVB is a regional bank, it’s considered the second largest bank failure in U.S. history after Washington Mutual, with $212 billion on its balance sheet. FDIC insurance would not cover most people, as the agency currently has only around $120 billion on hand.
Over the weekend, we did see some contagion as people lined up at their banks. SVB’s failure could lead to big companies opening up accounts in the Big 4, leading to further centralization of the banking system.With thousands of banks in the U.S., many regional banks could be experiencing similar issues to SVB. The best case scenario would have been for a private entity to come in and buy Silicon Valley Bank, making those depositors whole and stopping contagion. That did not happen.
With SVB depositors basically getting a bailout, the U.S. is essentially using a band-aid to plug a hole in the boat. If many regional banks have similar problems to SVB, the Fed will have to begin another episode of quantitative easing, which could bring inflation roaring back. The U.S. is at the onset of a major inflationary scenario. The Federal Reserve is the emperor, and the emperor is wearing no clothes. If it continues to raise interest rates as a means of fighting inflation, more cracks in the U.S. economy will spring up. If it stops raising interest rates and even lowers them eventually, the vector of inflation could creep back into everyday life.is a blockchain developer and the Komodo Platform’s chief technology officer.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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