Jason Zweig
WSJ, Mar. 17, 2023
“Even as rules have proliferated and bailouts multiplied, the U.S. stock market has suffered four crashes of least 20% since the year 2000.”
Don’t panic.
That’s the message financial regulators are sending—and it is barely working.
In the past week, U.S. authorities promised to back uninsured deposits at the failed Silicon Valley Bank and Signature Bank. They also created a new program to lend up to $25 billion to other banks with shaky balance sheets.
In response to these efforts to stem a potential panic, financial markets panicked. From March 9, when Silicon Valley Bank’s stock collapsed and depositors yanked their money out en masse, through March 15, regional-bank stocks lost more than 22%. Before a consortium of rivals helped rescue it on March 16, First Republic Bank had fallen over 80% in under six trading days.
Panic selling of bank stocks led to panic buying of U.S. Treasurys, leaving traders struggling to fill orders as prices swung wildly. By Wednesday the jitters jumped across the ocean to Europe. Credit Suisse
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It’s stock price fell 24%, its worst daily drop ever, after investors feared it, too, might need to be rescued. The next day, it was, with a loan of up to $53 billion from the Swiss central bank.
Markets may be signaling that the long, cultlike reverence for regulators and central banks is finally fading.
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