US Banking Crisis Is Not Over said J.P. Morgan Asset Management CIO
According to the chief investment officer at J.P. Morgan Asset Management, the banking industry crisis will continue to claim victims.
In a new interview with Bloomberg Television, Bob Michele argues that the banking crisis will not end with the First Republic.
According to Michele, regional banks are able to stay afloat with the help of two essential government programs.
According to him, if the government decides to yank the plug, these institutions could close their doors entirely.
“Well, I believe we have both [a banking problem and a problem with the First Republic]. And I believe it is somewhat naïve to limit this to the First Republic.
When viewed from a distance, this should never have occurred. Banking is one of the most severely regulated and capitalized industries on the planet. And I believe that the regional finance system is vital to the United States.
Thus, I believe a crisis exists. Regional institutions rely largely on the FDIC (Federal Deposit Insurance Corporation), in my opinion. They rely significantly on the Federal Home Loan Bank for additional funding. We do not know how they will function once these two programs expire.”
In a matter of hours earlier this week, shares of First Republic fell 50 percent after news broke that customers of the San Francisco-based bank withdrew $100 billion in deposits in March.
The U.S. government was anticipated to bail out the failing bank, but according to a recent report, officials are “unwilling to intervene in the First Republic rescue process.”