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The Hidden Threats Lurking in America's Banks: What the Federal Reserve Isn't Telling Us

Almost a year after Silicon Valley Bank's collapse, the Federal Reserve continues to withhold critical information about the deficiencies it identifies in US lenders. This lack of transparency prevents the urgency needed to address these issues effectively. Before its failure, SVB had over 30 supervisory warnings, including serious matters requiring immediate attention. As of June 2023, 18 large banks had 221 outstanding supervisory findings, with half failing satisfactory ratings due to risk management deficiencies. Despite the importance of these findings to investors, regulators treat them as confidential, only providing aggregate overviews in semi-annual reports. This secrecy reduces pressure on bank managers to resolve issues promptly. Even in severe cases where a bank’s operations are critically deficient, regulators maintain confidentiality, which can lead to unexplained mergers being called off. Enhanced disclosure, including significant warnings and restrictive agreements, would compel bank managers to act swiftly. A short delay in disclosure could balance the need for transparency with the risk of provoking adverse reactions. Such a regime might have prevented the SVB crisis by encouraging timely corrective actions. Improved incentives through better disclosure would benefit the broader financial system. Read More. 

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Skyrocketing Debt and Deficits Threaten Economic Collapse

Government debt in the US has surged nearly 50% since the early days of the Covid pandemic, reaching $34.5 trillion, which is over 120% of the total US economy. This alarming increase is raising concerns on Wall Street and in Washington. Before its collapse, Silicon Valley Bank had over 30 supervisory warnings, highlighting issues like interest-rate risks. The Congressional Budget Office (CBO) warns that public debt, currently $27.4 trillion, will rise from 99% of GDP to 116% over the next decade, reaching unprecedented levels. Rising budget deficits, projected to increase from $1.6 trillion in fiscal 2024 to $2.6 trillion by 2034, contribute to this problem. This deficit level, typically seen in economic downturns, is now occurring in relative prosperity. Prominent figures, including Fed Chair Jerome Powell and JPMorgan Chase CEO Jamie Dimon, emphasize the need to address these fiscal issues urgently. Without action, the risk to the stock market and the broader economy could become significant. Read Now.