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Black linkedin logo5/8/2023 While Krugman believes SVB's collapse wasn't another Lehman Brothers moment, the bank was still a crucial part of the tech sector, which justifies its rescue. Second is the criticism that regulators didn't need to step in, as the bank's collapse was more due to its unique problems rather than a systemic banking issue. So the talk about wokeness tells us nothing about bank failures – but a lot about the intellectual and moral bankruptcy of the modern American right," he added. "Banks have been going bust for centuries, since long efore HR departments began including boilerplate language about social responsibility in their mission statements. SVB was environmentally similar to other banks – so "woke" culture isn't ruining the banking system, the top economist said. Regulators stepped in to fully back SVB's depositors, even those over $250,000, breaking the long standing FDIC threshold for deposit insurance.īiden has promised the policy move was not a bailout and would come at no cost for taxpayers – but while that's wrong, and that it is a bailout, according to Krugman, he said markets are also off base in their fears that SVB's collapse and rescue could lead to economic doom, refuting four myths about the bank's demise.įirst is the idea that SVB failed because it was too concerned with diversity and inclusion to conduct proper risk management, which is "ludicrous," Krugman said. The tech-focused bank failed a week ago, and was taken over by the FDIC to mark the largest bank collapse since the 2008 crisis. But I'm hearing a lot of apocalyptic rhetoric right now, none of which seems justified by the available facts," Krugman said in an op-ed for the New York Times on Thursday. "The fallout from banking problems has made a murky economic situation even murkier, and it will be a while – maybe forever – before we know whether policymakers made the right call. The collapse and rescue of Silicon Valley Bank has led to some bleak rhetoric in markets, but almost none of the most commonly voiced fears are correct, according to Nobel economist Paul Krugman.
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