or SVB, and the subsequent run on several other banks in the U.S. and overseas thought to need bailouts.
“The interest rate shock is still there, ... and we’ve got the banking crisis on top, and we’ve got a smaller stock of savings,” Ian C. Shepherdson, chief economist of Pantheon Macroeconomics, said during a webcast Monday.
Business lending is slowing, housing prices are still in a downturn, wages increases are fading and manufacturing output is shrinking. These metrics all point to a deflationary slowdown.its multiple incompatible responsibilitiesEconomically speaking, the most important of these is what’s known as its “dual mandate” — to foster maximum employment and price stability.
The Fed seems to have overlooked that the rate hikes would create a problem for banks completely different from the issues that brought the banking system to the brink of meltdown during the financial crisis of 2007-09. The remedy imposed by Congress and the Fed was to force the banks to rebuild their capital cushions by reducing how much they could lend out as a multiple of equity ownership and deposits, and to improve the quality of the loans they issued. Among other things, the subprime mortgage market — lending to home buyers who would not qualify for mortgages under traditional terms — was all but wiped out.
That shouldn’t have mattered much, however. The securities holdings were divided into two categories — about $25.3 billion were listed as “available for sale,” which meant their decline in value had to be disclosed on the bank’s balance sheet, and $90.6 billion as “held to maturity.”
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