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If SVB Was A ‘Crisis,’ Six-Month Rate Cut Odds Are 70%
Last week, during a Bloomberg forum, Brian Moynihan suggested the media and market participants might be mischaracterizing March's regional banking tumult.
Moynihan, who, as it turns out, runs a bank himself, said that, "Crisis is too strong a word." Even as he implicitly chided hyperbolic accounts, he conceded that SVB's implosion created "a fair amount of disruption."
That "disruption" prompted a rethink of the likely trajectory for Fed policy. The day before the (non)crisis escalated, marke
Without being any kind of expert on the history of banking, I’m skeptical.
I went searching lists of pre-2007 US bank crises, looking for the sample of n=28, and quickly realized that I’d overlooked that the GS analysis is global. Most of its n=28 pre-2008 data points have to be ex-US, and indeed ex-G7, because to find twenty-eight genuine*** bank crises in the G7 prior to 2008, you have to go way, way back. Back the time my count of G7 bank crises reached double-digits, I was already back to the Great Depression.
Are the behaviors of non-G7 central banks (e.g. Argentina, Malaysia, Russia), of CBs prior to the Great Depression, or of CBs not nominally independent (e.g. Turkey), clearly predictive of the modern-day Federal Reserve?
I am skeptical that it is.
(I started querying this because there is an interesting piece at Alt-M that argues economists over-rely on unreliable historical data to overcount bank crises. Alt-M may be a crank site, I don’t know, but it got me wondering.)
*** “Genuine” meaning a crisis major enough to potentially drive CB action. I didn’t look at lists of individual bank failures, for example, because those are pretty routine.
They’re not talking about non-G7. They’re talking specifically about G10. You can see the sample in the linked figure below. Also, “genuine” is a subjective term.
https://heisenbergreport.com/wp-content/uploads/2023/04/GSCrisesAppendix.png
Ah, my error. Thanks.
Some people in the markets expect instant gratification. How many days ago did SVB & Signature fail? Long enough to hoist the all-clear flag?
I ask because just last week I spoke with two folks in the commercial real estate business. Their take is that the party has just begun = banks are going to be handed the keys for a growing number of office buildings. These things are based on lease and loan expirations, though settlement talks on many buildings are already underway. It’s hard to see why this will not continue.