U.S. inflation continues to dog both the American and, more importantly, the American consumer. The year-over-year inflation rate in April 2023 was 4.9%, per the U.S. Bureau of Labor <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank" rel="noopener">Statistics</a>. Many television economists and talking heads celebrated the slowing of inflation’s rate of growth. What these so-called experts fail to realize is that April’s inflation rate was 4.9% higher than the rate in <a href="https://www.bls.gov/news.release/archives/cpi_05112022.pdf" target="_blank" rel="noopener">April 2022</a>, which was 8.3%. This means that the inflation rate was 13.2% when compared to April 2021 – hardly a number worth celebrating.
Journalists have written extensively about the impact of inflation on America’s collective pocketbook. Higher gas prices, higher food prices, and higher prices for items such as used cars and trucks have dominated the headlines. But there are hidden costs to inflation, inflicting pain on the middle class and poorest Americans.
The U.S. real estate market is already in a recession. Through the first quarter of 2023, “U.S. <a href="https://finance.yahoo.com/news/fannie-mae-housing-market-recession-172217493.html" target="_blank" rel="noopener">housing</a> market activity as measured by private residential fixed investment has declined, on a nominal basis, for four straight quarters … Fannie Mae’s forecast model thinks declines in the U.S. housing market will spill over and help to push the U.S. economy into a recession.”  
The housing market is in a vicious cycle. <a href="https://www.marketwatch.com/story/buckle-in-30-year-mortgage-rates-are-back-above-7-heres-how-many-extra-dollars-home-buyers-will-have-to-pay-6fe3101f" target="_blank" rel="noopener">Interest rates</a> are above 7% for the third time this year. This is driving a lack of inventory as people with fixed rate mortgages below 5% are loath to sell their homes and purchase a new home at a higher interest rate. The lack of inventory is driving bidding wars in some areas, making first-time homeownership more difficult. It also makes it harder to recruit people to fill roles in companies that require relocation. Simply put, not many people want to venture into the housing market at this time.
It is not just housing. The U.S. auto market is quietly suffering, but not in a manner that many think. Prices are slowly <a href="https://finance.yahoo.com/news/best-month-buy-car-2023-231008486.html#:~:text=There%20is%20good%20news%20on,is%20poised%20to%20keep%20easing." target="_blank" rel="noopener">dropping</a>, as supply chain issues are abated, with new car prices expected to fall 2.5 &#8211; 5% and used vehicle prices expected to decrease 10 &#8211; 20%.
However, the typical interest rate on a new car loan rose to 8.95% in March, up from 5.66% in March of 2022. For used cars, the rate was 11.3% in March, up from 7.7% a year ago. A one percentage point increase on an auto <a href="https://www.cbsnews.com/news/auto-loan-interest-rate-march-2023/" target="_blank" rel="noopener">loan</a> “adds roughly $20 a month to a car note and thousands of dollars extra over the life of the loan.”
The higher interest rates for cars are not calculated in the inflation rate, just the drop in MSRP. The hidden cost is found in higher interest rates causing more drivers to fall behind on their car payments. In January 2023, the percentage of auto borrowers who were at least 60 days late on their bills climbed “2% from December and 20.4% from the previous year,&#8221; according to <a href="https://www.foxbusiness.com/money/car-debt-piles-up-more-americans-struggle-make-payments">Fox Business</a>. &#8220;The percentage of severe delinquencies surged to the highest level since 2006. Loan defaults increased 6.2% over the course of January 2023 and were up 33.5% from a year earlier. Car repossessions were up 11% in 2022.”
Another hidden cost of inflation is the grossly expanding credit card debt of American citizens. U.S. consumers now owe $986 billion on their credit cards, according to data from the <a href="https://www.newyorkfed.org/newsevents/news/research/2023/20230515">Federal Reserve Bank of New York.</a> That is a 17% increase from a year ago and a record high, as more households are forced to use their credit cards to pay monthly expenses such as food and utilities.
The final hidden cost of inflation is the increase in hardship withdrawals from retirement plans. In 2022, 401(k) <a href="https://money.usnews.com/money/retirement/401ks/articles/401k-hardship-withdrawals-hit-record-high#:~:text=Under%20the%20new%20rules%20related,usual%2010%25%20early%20withdrawal%20penalty." target="_blank" rel="noopener">hardship</a> withdrawals rose by 24%, not only demonstrating how people are struggling to make ends meet, but also signaling a pending retirement crisis, as people will have less money on which to depend during retirement.
Joe Biden’s inflation is destroying the American dream. At a time when 57% of <a href="https://www.wsbtv.com/news/local/many-americans-cant-afford-cover-emergency-expense-with-savings-survey-shows/IFNMZQ5WFNEQTCZIPQVTW7UMWA/" target="_blank" rel="noopener">Americans</a> cannot afford an emergency expense of $1,000 or more from their savings, Democrats want to not only increase the debt limit, but also raise taxes so they can spend more money, which will drive more inflation. Americans are hurting, and their pain is not covered in today’s financial headlines.
Jim Nelles is a Navy veteran and supply chain consultant based in Chicago. His articles have appeared in The Washington Examiner, Newsweek, Foxnews.com, and The Daily Wire. He has served as a chief procurement officer, chief supply chain officer, and chief operations officer for multiple companies.
The views expressed in this piece are those of the author and do not necessarily represent those of The Daily Wire.

Global financial crisis

The Hidden Costs Of Biden’s Inflation Are Destroying The American Dream

The Hidden Costs Of Biden's Inflation Are Destroying The American Dream

Automobiles

Banking

Biden Administration

Federal Reserve

Gas Prices

Inflation

Interest Rates

Readers Pass

Real estate

Former executives from <a href="https://www.dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a> and Signature Bank told members of the <a href="https://www.dailywire.com/topic/u-s-senate" target="_blank" rel="noopener">Senate</a> on Tuesday that their <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">institutions</a> failed as a result of panic from depositors.
The implosion of Silicon Valley Bank, where the vast majority of account balances exceeded the $250,000 threshold backed by the Federal Deposit Insurance Corporation (FDIC), prompted the government-backed company to <a href="https://www.dailywire.com/news/financial-authorities-announce-buyer-for-collapsed-silicon-valley-bank" target="_blank" rel="noopener">secure</a> insured and uninsured accounts in early March to prevent additional bank runs. Signature Bank nevertheless collapsed days later, while other regional financial institutions continued to languish, and First Republic Bank, a third medium-sized institution, was <a href="https://www.dailywire.com/news/jpmorgan-chase-the-nations-largest-bank-acquires-first-republic-bank-after-government-takeover" target="_blank" rel="noopener">sold</a> earlier this month in a deal brokered by regulators.
Former Silicon Valley Bank CEO Greg Becker said in <a href="https://www.banking.senate.gov/imo/media/doc/Becker%20Testimony%205-16-23.pdf" target="_blank" rel="noopener">remarks</a> before the Senate Banking Committee that the firm was “adequately capitalized” before the sale of a portfolio that had diminished in value due to Federal Reserve actions to increase the target federal funds rate, which in turn raised interest rates across the economy. He added that withdrawals started as Silvergate Bank, a company that served cryptocurrency users, decided to “voluntarily wind down and liquidate,” inducing fears among Silicon Valley Bank depositors.
The comments differed from a landmark <a href="https://www.dailywire.com/news/federal-reserve-reveals-why-silicon-valley-bank-collapsed" target="_blank" rel="noopener">report</a> published last month by the Federal Reserve, which concluded that the implosion of the bank was a “textbook case of mismanagement” as senior leadership “failed to manage basic interest rate and liquidity risk” and board members “failed to oversee senior leadership and hold them accountable.”
Former Signature Bank President Eric Howell meanwhile <a href="https://www.banking.senate.gov/imo/media/doc/Howell%20Testimony%205-16-23.pdf" target="_blank" rel="noopener">insisted</a> to lawmakers that his firm was “well-capitalized, solvent, and had sufficient borrowing capacity” before the FDIC seized control of the company. Former Signature Bank Chairman Scott Shay <a href="https://www.banking.senate.gov/imo/media/doc/Shay%20Testimony%205-16-23.pdf" target="_blank" rel="noopener">added</a> that the volatility in the cryptocurrency sector likewise translated to panic among the company’s depositors and prompted the rapid withdrawals despite a “solid plan to continue in operation.”
Lawmakers referenced the analysis from the Federal Reserve as they contended that Becker and the other executives should return their executive compensation. Sen. Elizabeth Warren (D-MA) said she filed legislation that would <a href="https://twitter.com/SenWarren/status/1658529112737079296" target="_blank" rel="noopener">confiscate</a> payment from executives who “blow up their banks,” while Sen. Tim Scott (R-SC) noted that Silicon Valley Bank had several <a href="https://twitter.com/SenatorTimScott/status/1658532908775223298" target="_blank" rel="noopener">open</a> risk management positions at the time of the company’s failure, asserting that managers were “more focused on chasing profitability than stability.”
President Joe Biden previously <a href="https://www.dailywire.com/news/biden-calls-for-crackdown-on-senior-bank-executives" target="_blank" rel="noopener">said</a> that members of Congress should increase federal authority to “hold senior management accountable when their banks fail” or enter into the control of regulators. Current law allows the FDIC to prohibit bank executives from receiving new positions at other banks if they engage in “willful or continuing disregard for the safety and soundness” of their institution; administration officials called on lawmakers to “strengthen this tool by lowering the legal standard for imposing this prohibition,” as well as expand authorization for the FDIC to collect fines “when their actions contribute to the failure of their firms.”
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Other regional banks, such as PacWest and Western Alliance, have witnessed significant turmoil in the stock market and increased withdrawal levels in recent weeks. Nearly half of Americans are presently concerned about the security of their bank deposits, according to a recent <a href="https://www.dailywire.com/news/confidence-in-american-banks-is-low-amid-continued-financial-sector-tumult" target="_blank" rel="noopener">survey</a> from Gallup, even as the FDIC will continue backing small accounts.

Elizabeth Warren

Executives Behind Failed Banks Tell Lawmakers Why The Companies Collapsed

Executives Behind Failed Banks Give Their Account Of Why The Companies Collapsed

Banks

Congress

Economy

Senate

Silicon Valley Bank

American households currently have nearly $17.1 trillion in consumer debt, with <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">balances</a> standing $2.9 trillion higher than before the lockdown-induced <a href="http://dailywire.com/topic/recession" target="_blank" rel="noopener">recession</a>, according to <a href="https://www.newyorkfed.org/newsevents/news/research/2023/20230515" target="_blank" rel="noopener">data</a> released on Monday from the <a href="http://dailywire.com/topic/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> Bank of New York.
Household debt in the first quarter of 2023 increased $1.2 trillion from the first quarter of 2022. Mortgage debt, typically the largest category of consumer loans maintained by households, now surpasses $12.0 trillion, a phenomenon that comes as the elevated interest rate environment forces prospective homebuyers to assume considerably higher mortgage rates. Student and automotive debt are each $1.6 trillion, while credit card debt neared $1.0 trillion.
Shares of mortgage debt in serious delinquency doubled from 0.3% to 0.6% over the past year, while automobile debt in serious delinquency rose from 1.6% to 2.3%, and credit card debt in serious delinquency rose from 3.0% to 4.6%.
Mortgage debt, which rose $864 billion over the past year, composed 71.7% of the overall household debt increase. Automobile debt rose $93 billion, and credit card debt rose $145 billion, marking 7.7% and 12.0% shares of the broader debt increase, while student loan debt was comparatively flat.
High mortgage rates, caused by actions from the Federal Reserve meant to combat inflation, have significantly decreased affordability for potential homebuyers in recent months. The 30-year fixed mortgage rate was below 3% in the two years after the lockdowns, according to <a href="https://fred.stlouisfed.org/series/MORTGAGE30US" target="_blank" rel="noopener">data</a> from government-backed mortgage company Freddie Mac, but the rate has risen to 6.4% as of last week, with the increases coming after the Federal Reserve hiked interest rates.
“The pandemic boom in purchase originations was driven by many factors: low mortgage rates, strong household balance sheets, and an increased demand for housing,” analysts from the Federal Reserve said in an <a href="https://libertystreeteconomics.newyorkfed.org/2023/05/the-great-pandemic-mortgage-refinance-boom/" target="_blank" rel="noopener">analysis</a>. “Homeowners who refinanced in 2020 and 2021 benefitted from historically low interest rates and will be enjoying low financing costs for decades ­to come.”
Median home sale prices increased from $322,600 in the second quarter of 2020 to $467,700 in the fourth quarter of 2022, according to <a href="https://fred.stlouisfed.org/series/MSPUS" target="_blank" rel="noopener">data</a> from the Department of Housing and Urban Development, followed by a moderate decline to $436,800 in the fourth quarter of 2023. Lower home prices in recent months come as a result of the high mortgage rates, which apply downward pressure on demand as families delay new home purchases.
Wage increases have failed to keep pace with inflation over the past two years, pressing consumers to finance more of their household expenditures with debt. The average age of cars and light-duty trucks on American roads has reached record levels as buyers likewise delay new purchases over elevated price levels and interest rates, according to a <a href="https://www.dailywire.com/news/americans-delay-buying-new-cars-as-long-as-possible-to-avoid-high-prices" target="_blank" rel="noopener">report</a> from S&amp;P Global.
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Americans are more pessimistic about their finances than at any time since the Great Recession: half of the respondents in a February <a href="https://www.dailywire.com/news/more-americans-say-they-are-worse-off-financially-than-any-other-time-since-the-great-recession" target="_blank" rel="noopener">survey</a> from Gallup said they are “financially worse off” compared to one year ago, while low-income Americans were the most likely to say they have less robust finances since last year.
Economic growth declined to a 1.1% annualized rate in the first quarter, marking a significant decrease as economic headwinds slow recovery from the recession and the interest rate hikes decrease consumer demand, according to an <a href="https://www.dailywire.com/news/american-economic-growth-slows-to-1-1-in-first-quarter" target="_blank" rel="noopener">estimate</a> from the Bureau of Economic Analysis.

Household Debt

American Consumer Debt Hits Record Level, Rises Nearly $3 Trillion Since Lockdowns

American Consumer Debt Hits Record Level

Recession

U.S.

<a href="http://dailywire.com/topic/stock-market" target="_blank" rel="noopener">Shares</a> for PacWest plummeted on Thursday after the <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">bank</a> revealed that deposits fell considerably last week amid broader <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">concerns</a> with the financial sector.
PacWest, which is based in Beverly Hills, California, and also serves clients in Arizona, Utah, and Texas, witnessed deposits fall 17% between the end of December and the end of March, from $34.0 billion to $28.0 billion, according to a first quarter earnings <a href="https://www.pacwestbancorp.com/news-market-data/news/news-details/2023/PacWest-Bancorp-Announces-Results-for-the-First-Quarter-2023/default.aspx#:~:text=March%2031%2C%202023-,ADJUSTED%20EARNINGS,the%20first%20quarter%20of%202023." target="_blank" rel="noopener">report</a> from the company. Another securities <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/1102112/000162828023017382/pacw-20230331.htm" target="_blank" rel="noopener">release</a> published on Thursday indicated that deposits declined another 9.5% last week, with most of the decreases occurring after news stories on May 4 and May 5 discussed the company’s troubles.
The document noted, however, that the bank maintains immediately available liquidity of $15.0 billion, far exceeding the $5.2 billion in uninsured deposits held at the financial institution.
News of the robust coverage ratio nevertheless failed to prevent investor concerns over the declining deposits: shares for PacWest tumbled more than 25% on Thursday as of the early afternoon, trading at $4.49 relative to $6.08 at market close on Wednesday. Stock prices for the company have therefore dropped more than 83% from the $26.68 seen on March 8, the day before the financial sector tumult.
The renewed pressure on PacWest came in the days after the <a href="https://www.dailywire.com/news/jpmorgan-chase-the-nations-largest-bank-acquires-first-republic-bank-after-government-takeover" target="_blank" rel="noopener">implosion</a> of First Republic Bank, a development which occurred weeks after Silicon Valley Bank and Signature Bank similarly collapsed, as account holders with balances above the Federal Deposit Insurance Corporation threshold at the three medium-sized banks rushed to withdraw their funds.
PacWest said in a <a href="https://www.pacwestbancorp.com/news-market-data/news/news-details/2023/Pacific-Western-Bank-Issues-Update/default.aspx" target="_blank" rel="noopener">statement</a> on May 4 that the company “has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news.”
Federal Reserve Chair Jerome Powell insisted at a press <a href="https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230503.pdf" target="_blank" rel="noopener">conference</a> last week that the banking system is “sound and resilient” even after the volatility in early March and the collapse of First Republic Bank. “We are committed to learning the right lessons from this episode and will work to prevent events like these from happening again,” he commented.
Interest rate hikes from the Federal Reserve contributed to the substantial losses incurred by Silicon Valley Bank as executives sold a long-term bond portfolio to cover withdrawals. Assets in the banking system are now $2 trillion lower than their book value as a result of the rate hikes, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.
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Western Alliance, another regional bank based in Phoenix, Arizona, serves clients throughout the western part of the country and had likewise seen tumult on the stock market after the sale of First Republic Bank. Two people briefed on discussions at Western Alliance claimed in a <a href="https://www.ft.com/content/bf2bd5af-1e55-4be3-b29d-f5cae9533b29" target="_blank" rel="noopener">report</a> for the Financial Times that the firm was considering options such as a full or partial sale, an assertion that the bank called “absolutely false” as a spokesperson contended that the article was “an instrument of short sellers and as a conduit for spreading false narratives about a financially sound and profitable bank.”
Western Alliance confirmed in a <a href="https://www.businesswire.com/news/home/20230511005521/en/Western-Alliance-Bancorporation-Issues-Deposit-Update" target="_blank" rel="noopener">statement</a> on Thursday that deposits have slightly increased since the beginning of last week while “readily available liquidity is approximately double the amount of uninsured deposits” as of Tuesday. Share prices for the company were relatively flat on Thursday as of the early afternoon, trading at $27.60 relative to the $27.48 closing price on Wednesday, despite a 61% decline from $71.56 on March 8.

PacWest

Regional Bank Stock Plummets After Company Reveals Deposits Dropped Again

PacWest Stock Plummets After Company Reveals Deposits Dropped Again

Stock Market

The consumer price index rose 4.9% between April 2022 and April 2023, marking a continued decline from elevated <a href="http://dailywire.com/topic/inflation" target="_blank" rel="noopener">inflation</a> even as higher price levels continue to constrain household budgets.
The month-to-month increase of 0.4% was in line with analyst expectations, while core inflation, which factors out the more volatile food and energy categories, also rose 0.4% and is in line with expectations. Food prices were flat and energy prices rose 0.6% while shelter prices, one of the largest contributors to the overall month-to-month increase, rose 0.4%, according to a <a href="https://www.bls.gov/news.release/pdf/cpi.pdf" target="_blank" rel="noopener">report</a> from the Bureau of Labor Statistics.
Despite the slight decrease from the 5.0% headline inflation <a href="https://www.dailywire.com/news/headline-inflation-edges-downward-even-as-costs-for-many-key-items-continue-to-soar" target="_blank" rel="noopener">recorded</a> in March 2023, food and electricity prices have increased 7.7% and 8.4%, respectively, between April 2022 and April 2023.
The latest inflation data comes as officials at the Federal Reserve increased the target federal funds rate in an effort to slow price level increases, a policy regime that raises the cost of borrowing funds for consumers and businesses, thereby lowering inflation, but dampening overall economic activity. Federal Reserve policymakers <a href="https://www.dailywire.com/news/federal-reserve-unveils-quarter-point-target-interest-rate-hike-as-banking-system-reels" target="_blank" rel="noopener">introduced</a> a quarter-point rate hike last week, marking a continued slowdown from previous rate hikes and reflecting caution as the financial sector reels from the <a href="https://www.dailywire.com/news/confidence-in-american-banks-is-low-amid-continued-financial-sector-tumult" target="_blank" rel="noopener">collapse</a> of three medium-sized banks.
Officials at the Federal Reserve have broadly targeted a 2.0% inflation rate and maximum employment over the past four decades. Even amid the elevated price level environment and macroeconomic constraints such as a bottlenecked supply chain, the labor market has been a relative bright spot in the economy: unemployment was charted at 3.4% last month, according to <a href="https://www.dailywire.com/news/unemployment-rate-ticks-down-number-of-jobs-increase-despite-economic-tumult" target="_blank" rel="noopener">data</a> from the Bureau of Labor Statistics released on Friday. Low labor force participation, on the other hand, has worsened inflationary pressures and supply chain constraints as businesses increase wages to fill their payrolls and seek to retain more workers.
Economic growth in the United States slowed to a 1.1% annualized rate in the first quarter, marking a significant decline from previous quarters, according to an advance <a href="https://www.dailywire.com/news/american-economic-growth-slows-to-1-1-in-first-quarter" target="_blank" rel="noopener">estimate</a> released last week by the Bureau of Economic Analysis. Federal Reserve officials have also <a href="https://www.dailywire.com/news/federal-reserve-officials-reveal-when-they-expect-a-recession-to-strike" target="_blank" rel="noopener">concluded</a> that the present instability in the financial system warrants a recession forecast for the latter portion of the year, followed by a predicted recovery over the subsequent two years.
President Joe Biden has repeatedly asserted that his policies are responsible for easing price levels in some product categories, even as inflation remains between three times and four times higher than levels seen at the start of his administration. “We are making progress in the fight against inflation,” he commented in one <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/31/statement-from-president-joe-biden-on-february-pce-report/" target="_blank" rel="noopener">statement</a> released in April. “The fight against inflation isn’t over, and every day my administration is working to give families more breathing room.”
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Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen each previously asserted that rising price levels were a temporary result of the demand increases that followed worldwide government lockdowns. Yellen <a href="https://www.dailywire.com/news/janet-yellen-admits-she-was-wrong-about-inflation-being-small-risk" target="_blank" rel="noopener">admitted</a> last year that she was incorrect due to “unanticipated and large shocks to the economy that have boosted energy and food prices.”

Consumer Prices

Headline Inflation Ticks Downward As Some Product Categories Continue To Surge

Headline Inflation Ticks Downward

<a href="http://dailywire.com/topic/unemployment" target="_blank" rel="noopener">Unemployment</a> reached an historically low 3.4% in April even as the number of new <a href="http://dailywire.com/topic/jobs" target="_blank" rel="noopener">jobs</a> exceeded analysts’ forecasts, according to <a href="https://www.bls.gov/news.release/empsit.nr0.htm" target="_blank" rel="noopener">data</a> from the Bureau of Labor Statistics released Friday, despite a number of <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">economic</a> headwinds and indications of slowing growth.
Total nonfarm employment increased by 253,000, surpassing analysts’ expectations of 180,000 new positions but falling below the 290,000 average recorded over the past six months. The recorded 3.4% unemployment rate in April marked a slight decrease from the 3.5% rate in March and is tied for the lowest joblessness level since 1969.
&#8220;Hiring has been slowing, but perhaps not as much as expected given the headwinds of persistent inflation, the steep increase in interest rates, and financial strains associated with bank failures,” Bankrate Senior Economic Analyst Greg McBride said in comments provided to The Daily Wire.
The scientific and technical services sector added 45,000 new positions, while the business services sector added 43,000 new positions and the healthcare sector added 40,000 new positions. Job losses occurred in temporary help services, which lost 23,000 positions.
The labor market has widely been considered a bright spot in an otherwise dismal economic landscape marked by record inflation and persistent supply chain bottlenecks. Low labor force participation across the economy, on the other hand, has worsened both trends as businesses raise wages to fill their payrolls and attract or retain more workers.
Robust demand for workers occurs even as pay increases more slowly than price levels, causing a decrease in purchasing power for households. Wages increased 4.4% on an annual basis as of April, surpassing expectations of 4.2% but falling below the 5.0% inflation rate recorded for March, according to <a href="https://www.dailywire.com/news/headline-inflation-edges-downward-even-as-costs-for-many-key-items-continue-to-soar" target="_blank" rel="noopener">data</a> from the Bureau of Labor Statistics.
The most recent unemployment report was unveiled amid continued unease in the financial sector: Silicon Valley Bank and Signature Bank, where the majority of customers maintained account balances above the Federal Deposit Insurance Corporation threshold, collapsed in March as users rushed to withdraw funds. First Republic Bank was obtained and subsequently sold by regulators on Monday, while PacWest executives <a href="https://www.dailywire.com/news/federal-reserve-just-said-banks-are-sound-and-resilient-another-one-might-collapse" target="_blank" rel="noopener">announced</a> the possibility of a sale this week and other regional banks with reduced deposit levels faced <a href="https://www.dailywire.com/news/several-regional-banks-face-market-turmoil-after-first-republic-collapse" target="_blank" rel="noopener">turmoil</a> on the stock market.
Federal Reserve officials meanwhile <a href="https://www.dailywire.com/news/federal-reserve-unveils-quarter-point-target-interest-rate-hike-as-banking-system-reels" target="_blank" rel="noopener">announced</a> a quarter-point increase in the target federal funds rate, a move which increases the cost of borrowing money such that inflationary pressures decrease, even as businesses assume less debt and decrease hiring.
&#8220;The Federal Reserve indicated this week that it is non-committal on the question of further interest rate increases,” McBride continued. “Next week’s inflation readings, including the Consumer Price Index, will be important to watch.&#8221;
American economic growth slowed to a 1.1% annualized rate in the first quarter, marking a significant decline from previous quarters as interest rate hikes dampen economic activity, according to an advance <a href="https://www.dailywire.com/news/american-economic-growth-slows-to-1-1-in-first-quarter" target="_blank" rel="noopener">estimate</a> released last week by the Bureau of Economic Analysis. Federal Reserve officials <a href="https://www.dailywire.com/news/federal-reserve-officials-reveal-when-they-expect-a-recession-to-strike" target="_blank" rel="noopener">concluded</a> that the instability in the financial system warrants a recession forecast for the end of the year, followed by a predicted recovery over the subsequent two years.
Interest rate hikes contributed to the substantial loss incurred by Silicon Valley Bank as executives liquidated a long-term bond portfolio to cover withdrawals. Assets in the banking system are $2 trillion lower than their book value as a result of Federal Reserve efforts to implement the current rollback in monetary stimulus, according to a recent <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.

Grocery Store

Unemployment Rate Ticks Down, Number Of Jobs Increase Despite Economic Tumult

Unemployment Rate Ticks Down Despite Economic Tumult

Jobs

Unemployment

Western Alliance <a href="http://dailywire.com/topic/stock-market" target="_blank" rel="noopener">stock</a> plummeted and partially recovered on Thursday as news outlets published reports that the regional <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">bank</a> would consider a sale, a claim the firm denied.
The volatility comes days after First Republic Bank <a href="https://www.dailywire.com/news/jpmorgan-chase-the-nations-largest-bank-acquires-first-republic-bank-after-government-takeover" target="_blank" rel="noopener">imploded</a> and weeks after Silicon Valley Bank and Signature Bank similarly failed as customers with balances above the Federal Deposit Insurance Corporation threshold at the three medium-sized banks rushed to withdraw their funds. Two people briefed on discussions at Western Alliance, which is based in Phoenix, Arizona, and serves clients throughout the western part of the country, claimed the firm is exploring options such as a full or partial sale, according to a <a href="https://www.ft.com/content/bf2bd5af-1e55-4be3-b29d-f5cae9533b29" target="_blank" rel="noopener">report</a> from the Financial Times.
Western Alliance later commented that the assertions in the article were “absolutely false” and said the company would pursue legal action over the story. “There is not a single element of the article that is true. Western Alliance is not exploring a sale, nor has it hired an advisor to explore strategic options,” a spokesperson said in a <a href="https://www.cnn.com/2023/05/04/business/western-alliance-stock-fall/index.html" target="_blank" rel="noopener">statement</a> to CNN. “It is shameful and irresponsible that the Financial Times has allowed itself to be used as an instrument of short sellers and as a conduit for spreading false narratives about a financially sound and profitable bank.”
Shares for Western Alliance fell nearly 34% on Thursday even as regulators repeatedly halted trading of the company’s stock. The firm has seen share prices decrease more than 40% over the past five days and more than 68% since the banking crisis started two months ago.
Western Alliance saw deposits fall more than 11% between the end of December and the end of March, from $54 billion to $48 billion, according to a first-quarter earnings <a href="https://s21.q4cdn.com/920996046/files/doc_financials/2023/q1/Press-Release-3-31-2023-Final.pdf" target="_blank" rel="noopener">report</a> from the company. PacWest, which saw declines of 17% over the same time horizon, also witnessed market volatility on Thursday and <a href="https://www.dailywire.com/news/federal-reserve-just-said-banks-are-sound-and-resilient-another-one-might-collapse" target="_blank" rel="noopener">announced</a> that the company would evaluate the possibility of a sale and other “options to maximize shareholder value.”
The continued tumult and investor unease in the financial sector occurs immediately after Federal Reserve Chair Jerome Powell <a href="https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230503.pdf" target="_blank" rel="noopener">declared</a> on Wednesday afternoon that the banking system remains “sound and resilient.”
“We are committed to learning the right lessons from this episode and will work to prevent events like these from happening again,” he said at a press conference.
Officials at the Federal Reserve unveiled a <a href="https://www.dailywire.com/news/federal-reserve-reveals-why-silicon-valley-bank-collapsed" target="_blank" rel="noopener">report</a> last week concluding that the failure of Silicon Valley Bank came as executives neglected to properly assess risk and address turmoil within the technology sector, upon which the firm was heavily reliant for customers.
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Policymakers also worked to <a href="https://www.dailywire.com/news/federal-reserve-unveils-quarter-point-target-interest-rate-hike-as-banking-system-reels" target="_blank" rel="noopener">increase</a> the target federal funds rate over the past year to combat inflation by hiking interest rates across the economy, prompting heavy losses when Silicon Valley Bank sold a long-term bond portfolio to fund withdrawals. Assets in the overall banking system are now $2 trillion lower than their book value due to the elevated interest rates, according to a recent <a href="https://www.dailywire.com/news/nearly-200-other-banks-vulnerable-to-svb-style-collapse-study-says" target="_blank" rel="noopener">study</a> from the National Bureau of Economic Research.

Western Alliance

Another Bank Stock Plummets As Firm Denies Reports That A Sale Is On The Table

Western Alliance Stock Plummets As Company Denies Reports That A Sale Is On The Table

Business

PacWest <a href="http://dailywire.com/topic/stock-market" target="_blank" rel="noopener">stock</a> plummeted as investors remain worried about the financial <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">sector</a>, a decline which occurred despite <a href="http://dailywire.com/topic/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> officials assuring market actors hours earlier that the <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">banking</a> system is “sound and resilient.”
First Republic Bank <a href="https://www.dailywire.com/news/jpmorgan-chase-the-nations-largest-bank-acquires-first-republic-bank-after-government-takeover" target="_blank" rel="noopener">imploded</a> on Monday, weeks after Silicon Valley Bank and Signature Bank similarly collapsed, as account holders with balances above the Federal Deposit Insurance Corporation threshold at the three medium-sized banks rushed to withdraw their funds. PacWest was among several other regional banks to see stock prices sharply <a href="https://www.dailywire.com/news/several-regional-banks-face-market-turmoil-after-first-republic-collapse" target="_blank" rel="noopener">decline</a> earlier this week amid news of the First Republic Bank failure and subsequent sale to JPMorgan Chase.
Shares for PacWest, which is based in Beverly Hills, California, and also serves clients in Arizona, Utah, and Texas, declined more than 45% between market close on Wednesday and early morning trading on Thursday. The firm has seen stock prices decrease more than 67% over the past five days and nearly 87% since the banking crisis started two months ago.
Several reports indicated that PacWest would consider strategic options such as a sale or capital raise; the company confirmed in a <a href="https://www.globenewswire.com/news-release/2023/05/04/2661025/13824/en/Pacific-Western-Bank-Issues-Update.html" target="_blank" rel="noopener">statement</a> on Wednesday that multiple “potential partners and investors” have approached executives.
“The company will continue to evaluate all options to maximize shareholder value,” the statement from PacWest noted. “The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news.”
The decline in PacWest shares came hours after Federal Reserve Chair Jerome Powell insisted at a press <a href="https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230503.pdf" target="_blank" rel="noopener">conference</a> that the banking system is “sound and resilient” even after the tumult in early March and the collapse on Monday. “We are committed to learning the right lessons from this episode and will work to prevent events like these from happening again,” he said.
Federal Reserve officials <a href="https://www.dailywire.com/news/federal-reserve-unveils-quarter-point-target-interest-rate-hike-as-banking-system-reels" target="_blank" rel="noopener">announced</a> a quarter-point target federal funds rate hike on Wednesday afternoon, a tactic which is meant to combat inflationary pressures but often results in constrained economic activity as the cost to borrow funds increases for consumers and businesses. Interest rate hikes contributed to the substantial loss incurred by Silicon Valley Bank as executives liquidated a long-term bond portfolio to cover withdrawals. Assets in the banking system are now $2 trillion lower than their book value as a result of the recent Federal Reserve efforts, according to a <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.
PacWest saw deposits fall 17% between the end of December and the end of March, from $34 billion to $28 billion, according to a first quarter earnings <a href="https://www.pacwestbancorp.com/news-market-data/news/news-details/2023/PacWest-Bancorp-Announces-Results-for-the-First-Quarter-2023/default.aspx#:~:text=March%2031%2C%202023-,ADJUSTED%20EARNINGS,the%20first%20quarter%20of%202023." target="_blank" rel="noopener">report</a> from the company. Other regional banks, such as Western Alliance, saw similar declines.
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Monetary policymakers <a href="https://www.dailywire.com/news/federal-reserve-officials-reveal-when-they-expect-a-recession-to-strike" target="_blank" rel="noopener">concluded</a> that the instability in the financial system warrants a recession forecast for the end of the year, followed by a predicted recovery over the course of the subsequent two years. “If banking and financial conditions and their effects on macroeconomic conditions were to deteriorate more than assumed in the baseline, then the risks around the baseline would be skewed to the downside for both economic activity and inflation, particularly because historical recessions related to financial market problems tend to be more severe and persistent than average recessions,” minutes from a recent Federal Reserve meeting said.

Federal Reserve Just Said Banks Are ‘Sound And Resilient.’ Another One Is In Crisis.

PacWest Stock Plummets As Banking Volatility Continues

This article is adapted from today’s Morning Wire Afternoon Update. To listen to the podcast version, click <a href="https://www.dailywire.com/podcasts/morning-wire" target="_blank" rel="noopener">here</a>.
Atlanta Shooting:
One person is dead and four are injured after a shooter opened fire in an Atlanta medical facility shortly after noon today. According to police, the shooter entered Northside Hospital Medical Midtown wearing a gray hoodie and gloves and carrying a bag. It is believed that the suspect is a male and used a handgun. Police are conducting a manhunt for the suspect who is still at large. No motives have been suggested thus far. 
Russia Accuses Ukraine Of Assassination Attempt:
Russia <a href="https://www.dailywire.com/news/russia-accuses-ukraine-of-sending-drones-to-assassinate-putin" target="_blank" rel="noopener">accused</a> Ukraine of attempting to assassinate Russian President Vladimir Putin. Video on social media appears to show a drone exploding above the Kremlin on Wednesday. 
The Kremlin said in a statement that two drones were intercepted and shot down by Russian security forces and that the impacts didn’t hurt any people or property. Putin was apparently away from the Kremlin at the time. A spokesman for Ukrainian President Volodymyr Zelensky denied Russia’s allegations.
 However, right after news of the drone attack broke, Zelensky’s chief of staff posted a string of fire emojis to his Telegram channel. He deleted the post shortly after. The attack, if it was Ukraine, would be a significant escalation in Ukraine’s attacks on Russian territory. The drone strike follows a string of attacks on Russian freight lines, military depots, and other targets, most of which have gone unaddressed by Ukraine’s government.
New York Bans Gas Stoves In Most New Buildings
New York has <a href="https://dailycaller.com/2023/05/03/ny-first-state-to-pass-gas-ban/" target="_blank" rel="noopener">officially become the first state</a> in the nation to ban natural gas and other fossil fuel hookups in most new buildings. 
On Tuesday evening, the New York Senate and Assembly voted to approve the $229 billion dollar state budget which contained the provision. There are exceptions, such as some commercial and industrial buildings including hospitals, laundromats, restaurants, and more. Governor Hochul called the move necessary, comparing the transition to the move away from coal as a primary energy source. Meanwhile, Republican State Senator Thomas O&#8217;Mara criticized the move, saying the electrical grid isn’t equipped for the transition.
Olympian Dead:
American <a href="https://www.dailywire.com/news/u-s-olympic-champion-sprinter-tori-bowie-dies-at-32" target="_blank" rel="noopener">track and field star Tori Bowie</a>, a three-time Olympic medalist and a two-time world champion in track and field, has died. She was 32 years old.  No cause of death has been given.
Texas Authorities Arrested Accused Illegal Alien Killer&#8217;s Wife:
Authorities have now arrested the wife of the illegal immigrant accused of killing five people, including a 9-year-old, last week in Cleveland, Texas. Police say the shooting suspect is a Mexican national illegally in the country after having been deported several times. Tim Kean, chief deputy with the San Jacinto County Sheriff&#8217;s Office <a href="https://abc7ny.com/francisco-oropesa-arrested-cleveland-texas-mass-shooting-divimara-lamar-nava-shooter/13207789/" target="_blank" rel="noopener">told</a> reporters, &#8220;Anybody that helped this maniac definitely has some kind of issues as far as I&#8217;m concerned.&#8221;
Brazilian Police Seach Home Of Former President:
Brazil’s Federal Police <a href="https://www.wsj.com/articles/brazilian-police-search-home-of-ex-president-bolsonaro-in-vaccine-probe-42bc4e1" target="_blank" rel="noopener">searched</a> the home of former President Jair Bolsonaro and seized his phone as part of an investigation into alleged counterfeit COVID-19 vaccine cards. According to a police statement, the investigation focused on whether cards held by Bolsonaro and his family members were altered in order to comply with U.S. vaccine mandates for travelers coming from outside the country. 
Fed Hikes Rates:
The federal reserve <a href="https://www.dailywire.com/news/federal-reserve-unveils-quarter-point-target-interest-rate-hike-as-banking-system-reels" target="_blank" rel="noopener">announced</a> Wednesday that it raised interest rates for the 10th time in a little more than 12 months. The quarter-point hike brings the Fed’s interest rate to between 5 and 5.25 percent. 
To listen to the audio version of this podcast, <a href="https://podcasts.apple.com/us/podcast/morning-wire/id1576594336" target="_blank" rel="noopener">click here</a>. And for more in-depth discussion of the biggest stories of the day, listen to the latest full episode of Morning Wire every morning.

Wednesday

Wednesday Afternoon Update: Atlanta Shooting, Russia Accuses Ukraine Of Assassination Attempt, Olympian Dead At 32

Atlanta

Brazil

Gas stoves

Illegal Immigration

Jair Bolsonaro

Kathy Hochul

New York

Olympics

Russia

Officials at the <a href="http://dailywire.com/topic/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> announced a 0.25% increase in the target <a href="http://dailywire.com/topic/interest-rates" target="_blank" rel="noopener">federal funds</a> rate on Wednesday, marking a slowdown from previous rate hikes meant to combat <a href="http://dailywire.com/topic/inflation" target="_blank" rel="noopener">inflation</a>, even as the financial sector contends with the collapse of three medium-sized regional <a href="http://dailywire.com/topic/banks" target="_blank" rel="noopener">banks</a>.
Rate hikes increase the cost of borrowing money, decreasing inflationary pressures as consumers and businesses assume less debt but simultaneously slowing the economy. Federal Reserve officials formerly set interest rate targets as low as 0.0% during the lockdown-induced recession to stimulate economic activity; rate targets now sit between 5.0% and 5.25%.
The Federal Open Market Committee said in a <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20230503a.htm" target="_blank" rel="noopener">statement</a> that officials will &#8220;take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments&#8221; as they consider future actions to decrease price pressures.
Central bankers <a href="https://www.dailywire.com/news/breaking-federal-reserve-hikes-target-interest-rates-half-a-percentage-point" target="_blank" rel="noopener">raised</a> rates by 0.75% on four occasions before implementing a 0.5% hike at the end of last year. Officials also <a href="https://www.dailywire.com/news/federal-reserve-hikes-target-interest-rates-by-quarter-point-as-officials-balance-fighting-inflation-and-protecting-banks" target="_blank" rel="noopener">hiked</a> rates 0.25% two months ago.
The most recent target rate increase occurs after inflation reached 5.0% two months ago, according to <a href="https://www.dailywire.com/news/headline-inflation-edges-downward-even-as-costs-for-many-key-items-continue-to-soar" target="_blank" rel="noopener">data</a> from the Bureau of Labor Statistics, marking relief from the 9.1% rate seen last summer even as costs for many items remain elevated and wage increases fail to keep pace with price levels. Record inflation coincides with supply chain bottlenecks and labor shortages, which have forced firms to increase prices on consumers over the past two years.
American economic growth meanwhile slowed to a 1.1% annualized rate in the first quarter, marking a significant decline from previous quarters as the headwinds slow recovery from the recession, according to an advance <a href="https://www.dailywire.com/news/american-economic-growth-slows-to-1-1-in-first-quarter" target="_blank" rel="noopener">estimate</a> from the Bureau of Economic Analysis.
The rate hike announcement also comes days after First Republic Bank collapsed, passed into Federal Deposit Insurance Corporation receivership, and was <a href="https://www.dailywire.com/news/jpmorgan-chase-the-nations-largest-bank-acquires-first-republic-bank-after-government-takeover" target="_blank" rel="noopener">sold</a> by regulators to JPMorgan Chase. Several other regional banks, including PacWest, Zions, Comerica, and Western Alliance, faced <a href="https://www.dailywire.com/news/several-regional-banks-face-market-turmoil-after-first-republic-collapse" target="_blank" rel="noopener">turmoil</a> on the stock market this week as the sector continues to reel from the sudden collapses of Silicon Valley Bank and Signature Bank two months ago.
Interest rate hikes contributed to the substantial loss incurred by Silicon Valley Bank as executives liquidated a long-term bond portfolio to cover withdrawals. Assets in the banking system are $2 trillion lower than their book value as a result of Federal Reserve efforts to implement the current rollback in monetary stimulus, according to a recent <a href="https://www.dailywire.com/news/banking-system-is-sound-and-government-will-back-deposits-at-smaller-banks-yellen-promises" target="_blank" rel="noopener">study</a> from analysts at the National Bureau of Economic Research.
Officials at the Federal Reserve <a href="https://www.dailywire.com/news/federal-reserve-officials-reveal-when-they-expect-a-recession-to-strike" target="_blank" rel="noopener">concluded</a> that the volatility in the financial system warrants a recession forecast for the end of the year, followed by a predicted recovery over the course of the subsequent two years. Policymakers also estimated that the historically low unemployment rate would rise toward the beginning of next year.
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“If the effects of the recent developments in the banking sector on macroeconomic conditions were to abate quickly, then the risks around the baseline would be tilted to the upside for both economic activity and inflation,” minutes from a recent meeting said. “If banking and financial conditions and their effects on macroeconomic conditions were to deteriorate more than assumed in the baseline, then the risks around the baseline would be skewed to the downside for both economic activity and inflation, particularly because historical recessions related to financial market problems tend to be more severe and persistent than average recessions.”

Federal Reserve Unveils Quarter-Point Target Interest Rate Hike As Banking System Reels

Federal Reserve Unveils Quarter-Point Rate Hike As Financial Sector Reels

The Federal Deposit Insurance Corporation, also known as the FDIC, will imminently place First Republic Bank under receivership, marking the third <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">collapse</a> of a medium-sized American <a href="http://dailywire.com/topic/banks?_gl=1*krxv2c*_ga*NzUzNDA5ODIxLjE2NzkzMjkzNzM.*_ga_CZKR9ZYKJP*MTY4MjcwNzM5Ni4xNTYuMS4xNjgyNzE1ODkzLjU0LjAuMA.." target="_blank" rel="noopener">bank</a> in less than two months.
First Republic Bank, headquartered in San Francisco, California, caters mainly to wealthy clients with account balances above the $250,000 deposit threshold backed by the FDIC. The company witnessed many customers withdraw their funds in recent weeks as the recent implosions of Silicon Valley Bank and Signature Bank rattled trust in the financial system. FDIC officials had moved to secure both insured and uninsured deposits at the two failed companies to decrease the risk of bank runs at other financial institutions.
Regulators determined that the unstable position of First Republic Bank necessitates the imminent takeover of the company by the FDIC, one unnamed source <a href="https://www.reuters.com/business/finance/us-regulator-set-take-over-first-republic-source-2023-04-28/" target="_blank" rel="noopener">told</a> Reuters on Friday, adding that no time remains for executives to pursue a bailout through a private deal.
Shares for First Republic Bank plummeted more than 43% on Friday, reaching a low of $3.51 before markets closed. The company’s stock was priced at $121.54 at the beginning of the year, marking a 97% loss for investors over the past four months.
News of the FDIC takeover comes days after the first quarter earnings <a href="https://www.dailywire.com/news/first-republic-bank-shares-plummet-after-more-than-40-of-depositors-pull-their-funds" target="_blank" rel="noopener">report</a> for First Republic Bank showed that deposits at the company had decreased from $176 billion on December 31 to $104 billion on March 31. The total amount of deposits reported at the end of last month included a $30 billion loan <a href="https://www.dailywire.com/news/big-banks-will-rescue-collapsing-first-republic-bank-with-30-billion-deal" target="_blank" rel="noopener">provided</a> by large financial institutions such as Wells Fargo, JPMorgan Chase, Bank of America, and Citigroup, a deal that the federal government enabled to maintain the solvency of First Republic Bank.
Executives had vowed in the earnings report that the company was “taking actions to strengthen its business and restructure its balance sheet,” such as increasing insured deposits, decreasing borrowed funds from the Federal Reserve, and reducing loan balances to “correspond with the reduced reliance on uninsured deposits.” The firm was planning to reduce employee headcount between 20% and 25% in the second quarter, decrease executive compensation, and consolidate corporate office space.
“With the stabilization of our deposit base and the strength of our credit quality and capital position, we continue to take steps to strengthen our business,” First Republic Bank Chairman Jim Herbert and First Republic Bank CEO Mike Roffler had insisted in the report. “We remain fully committed to serving our communities, and we are grateful for the ongoing support of our clients and colleagues.”
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Silicon Valley Bank was <a href="https://www.dailywire.com/news/financial-authorities-announce-buyer-for-collapsed-silicon-valley-bank" target="_blank" rel="noopener">acquired</a> by First Citizens Bank at the end of last month; the company purchased $72 billion of Silicon Valley Bank’s assets at a discount of $16.5 billion while $90 billion remained with the FDIC. New York Community Bancorp meanwhile acquired Signature Bank for more than $38 billion.
Officials at the Federal Reserve <a href="https://www.dailywire.com/news/federal-reserve-reveals-why-silicon-valley-bank-collapsed" target="_blank" rel="noopener">concluded</a> earlier on Friday that Silicon Valley Bank failed because of a “textbook case of mismanagement” in which executives failed to properly assess macroeconomic risk and volatility within the technology sector, upon which the firm was heavily reliant. Monetary policymakers forecasted in a meeting last month that the turmoil in the financial system which started with Silicon Valley Bank warrants a recession forecast for the end of the year, according to <a href="https://www.dailywire.com/news/federal-reserve-officials-reveal-when-they-expect-a-recession-to-strike" target="_blank" rel="noopener">minutes</a> released by the Federal Open Market Committee and the Federal Reserve Board of Governors.

First Republic Bank

Third Major American Bank Collapses, Regulators Will Soon Take Company Over: Report

Third Major Bank Collapses, Regulators To Take Firm Over: Report

Officials at the <a href="https://www.dailywire.com/topic/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> concluded on Friday that <a href="http://dailywire.com/topic/silicon-valley-bank" target="_blank" rel="noopener">Silicon Valley Bank</a> collapsed last month because executives failed to properly assess <a href="http://dailywire.com/topic/economy" target="_blank" rel="noopener">macroeconomic</a> risk and volatility within the technology sector, upon which the firm was heavily reliant.
The implosion of Silicon Valley Bank, where the vast majority of account balances exceeded the $250,000 threshold backed by the FDIC, prompted the government-backed company to <a href="https://www.dailywire.com/news/financial-authorities-announce-buyer-for-collapsed-silicon-valley-bank" target="_blank" rel="noopener">secure</a> both insured and uninsured accounts at the firm in order to prevent additional bank runs. Signature Bank nevertheless collapsed days later, while other regional financial institutions such as First Republic Bank continue to <a href="https://www.dailywire.com/news/first-republic-bank-shares-plummet-after-more-than-40-of-depositors-pull-their-funds" target="_blank" rel="noopener">languish</a> as confidence in the sector diminishes.
Silicon Valley Bank imploded because of a “textbook case of mismanagement” as senior leadership “failed to manage basic interest rate and liquidity risk” and board members “failed to oversee senior leadership and hold them accountable,” according to a landmark <a href="https://www.federalreserve.gov/publications/files/svb-review-20230428.pdf" target="_blank" rel="noopener">review</a> of the crisis released by the Federal Reserve, which is responsible for regulating private banks.
“Silicon Valley Bank was a highly vulnerable firm in ways that both its board of directors and senior management did not fully appreciate,” officials said in the report. “These vulnerabilities, foundational and widespread managerial weaknesses, a highly concentrated business model, and a reliance on uninsured deposits, left Silicon Valley Bank acutely exposed to the specific combination of rising interest rates and slowing activity in the technology sector that materialized in 2022 and early 2023.”
Monetary policymakers have worked to increase the target federal funds rate over the past year in an effort to combat inflation by hiking interest rates across the economy, prompting heavy losses when Silicon Valley Bank sold a long-term bond portfolio to fund withdrawals. Assets in the overall banking system are now $2 trillion lower than their book value due to the elevated interest rates, according to a recent <a href="https://www.dailywire.com/news/nearly-200-other-banks-vulnerable-to-svb-style-collapse-study-says" target="_blank" rel="noopener">study</a> from the National Bureau of Economic Research.
Silicon Valley Bank relied heavily on technology companies, many of which suddenly demanded to withdraw funds when a handful of venture capital firms voiced concerns about the financial institution’s solvency. The review added that Silicon Valley Bank “failed its own internal liquidity stress tests and did not have workable plans to access liquidity” amid volatile moments.
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“Silicon Valley Bank managed interest rate risks with a focus on short-run profits and protection from potential rate decreases, and removed interest rate hedges, rather than managing long-run risks and the risk of rising rates,” the review continued. “In both cases, the bank changed its own risk-management assumptions to reduce how these risks were measured rather than fully addressing the underlying risks.”
Officials at the Federal Reserve concluded in a meeting last month that the turmoil in the financial system which started with the Silicon Valley Bank collapse warrants a recession forecast for the end of the year, according to <a href="https://www.dailywire.com/news/federal-reserve-officials-reveal-when-they-expect-a-recession-to-strike" target="_blank" rel="noopener">minutes</a> released by the Federal Open Market Committee and the Federal Reserve Board of Governors. The review acknowledged that central bankers “did not appreciate the seriousness of critical deficiencies in the firm’s governance, liquidity, and interest rate risk management,” meaning that the Silicon Valley Bank retained solid ratings even as “conditions deteriorated and significant risk to the firm’s safety and soundness emerged.”

Federal Reserve Releases Review Detailing Why Silicon Valley Bank Collapsed

Federal Reserve Concludes Silicon Valley Bank Imploded From Mismanagement

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