Former FDIC Vice Chair asserts that the economy was "shocked" by the interest rate hike, leading to bank failures.
After the collapse of the Silicon Valley Bank and Signature Bank, President Biden called on Congress to make it easier for regulators to hold failed banks accountable. Former Vice Chair of the FDIC Thomas Hoenig joined the Meet the Press NOW roundtable with his analysis. » Subscribe to NBC News: » Watch more NBC video: NBC News Digital is a collection of innovative and powerful news brands that deliver compelling, diverse and engaging news stories. NBC News Digital features NBCNews.com, MSNBC.com, TODAY.com, Nightly News, Meet the Press, Dateline, and the existing apps and digital extensions of these respective properties. We deliver the best in breaking news, live video coverage, original journalism and segments from your favorite NBC News Shows. Connect with NBC News Online! NBC News App: Breaking News Alerts: Visit NBCNews.Com: Find NBC News on Facebook: Follow NBC News on Twitter: Get more of NBC News delivered to your inbox: nbcnews.com/newsletters #SiliconValleyBank #Biden #Finance...(read more)
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The decision by the Federal Reserve to hike interest rates in 2008 may have been well-meaning, but it ended up shocking the economy and had a significant impact on the banking industry. At the time, banks were already under stress due to the subprime mortgage crisis, and the rate hike only served to make matters worse. According to former Federal Deposit Insurance Corporation (FDIC) vice chair Thomas Hoenig, the decision contributed to bank failures and damage to the economy. In an interview with CNBC, Hoenig said that the rate hike "was a shock that the system wasn't ready for." At the time, the Fed had been keeping rates low to encourage lending and stimulate the economy. However, when inflation began to rise, the Fed felt compelled to raise rates to combat it. The problem was that the banking industry was not prepared for the sudden change in policy. The rate hike had three major effects on the banking industry. First, it increased the cost of borrowing for banks, which hurt their ability to lend to customers. Second, it made it more difficult for banks to attract deposits, as higher rates for savers meant it was more expensive for banks to fund their operations. Finally, it hurt the value of the assets on banks' balance sheets, as higher rates made it more expensive for customers to repay their loans. These effects put many banks under tremendous stress, and many of them failed as a result. According to Hoenig, the rate hike "was one of the contributing factors to the financial crisis." The lesson to be learned from the rate hike is that monetary policy can have unintended consequences. While the Fed's decision was well-meaning, it ended up having a negative impact on the economy. Policymakers need to be aware of these unintended consequences and factor them into their decision-making process. Hoenig's comments come at a time when the Fed is once again considering raising interest rates. While the banking industry is in a much stronger position now than it was in 2008, policymakers need to be mindful of the potential consequences of raising rates too quickly or too aggressively. In short, the rate hike in 2008 was a shock to the system that contributed to bank failures and damage to the economy. It serves as a reminder that monetary policy can have unintended consequences, and that policymakers need to be aware of these consequences when making decisions. https://inflationprotection.org/former-fdic-vice-chair-asserts-that-the-economy-was-shocked-by-the-interest-rate-hike-leading-to-bank-failures/?feed_id=83364&_unique_id=6427b40134063 #Inflation #Retirement #GoldIRA #Wealth #Investing #MeetthePressNOW #NBCNewsNOW #BankFailures #MeetthePressNOW #NBCNewsNOW
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