US Bank Lending Drops by Record $105 Billion in Two Weeks, Trillions Moving to Money Market Accounts, Elon Musk Warns ‘Trend Will Accelerate’

The banking manufacture successful the United States is inactive struggling aft the illness of 3 large banks. According to statistics, slope lending successful the U.S. has dropped by adjacent to $105 cardinal successful the past 2 weeks of March, which is the largest diminution connected record. Additionally, Elon Musk, a Tesla enforcement and proprietor of Twitter, precocious commented connected trillions of dollars being withdrawn from banks into wealth marketplace funds, and helium insists that the “trend volition accelerate.”

Statistics Still Show Glaring Signs of U.S. Bank Weaknesses; Musk Issues Warning

There are inactive plentifulness of signs showing that the U.S. banking strategy is feeling the aftermath of respective high-profile slope collapses. During the archetypal week of March, Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank (SBNY) closed down operations. Both SVB and SBNY were placed nether authorities control. The U.S. Federal Reserve, Treasury, and Federal Deposit Insurance Corporation (FDIC) bailed retired SBNY and SVB’s uninsured depositors and made each depositors whole.

Since then, the banking contagion has dispersed crossed the United States and internationally, with fiscal institutions similar SVB UK and Credit Suisse faltering. According to a caller report published by Bloomberg, the past 2 weeks of March saw the largest contraction successful lending connected grounds aft the collapses. The Federal Reserve’s information connected the taxable lone goes backmost to 1973, and successful the past 2 weeks of March 2023, astir $105 cardinal was erased.

Alexandre Tanzi from Bloomberg explains that loans consisted of industrial, commercial, and existent property loans. Furthermore, past week saw $64.7 cardinal successful commercialized slope deposits removed from fiscal institutions, which marked the 10th consecutive play diminution successful deposits. Another motion of occupation is the spike successful Federal Home Loan Bank (FHLB) enslaved issuance successful March. Jack Farley, a writer and macro researcher for Blockworks, shared a chart showing FHLB enslaved issuance surging past period “to conscionable nether a 4th trillion dollars.” Farley added:

This is implicit six times the post-GFC mean for the period of March and it indicates banks’ scramble for cash.

Moreover, the fashionable Twitter relationship Wall Street Silver (WSS) shared a video of economist Peter St. Onge explaining that a important magnitude of slope deposits are moving to wealth marketplace accounts. WSS tweeted, “Trillions of dollars are draining retired of the banks… into wealth marketplace funds. That weakens the banks. Fear that the banks are astatine hazard is driving this inclination and frankincense making the banks adjacent weaker.” The economist’s video connection and WSS’s tweet sparked a effect from Twitter’s owner, Elon Musk. The Tesla enforcement warned:

This inclination volition accelerate.

This is not the archetypal clip Musk has cautioned the nationalist astir the U.S. banking system, arsenic helium has criticized the U.S. Federal Reserve connected respective occasions. In November 2022, Musk warned that the U.S. would spot a terrible recession and urged the Fed to slash the national funds rate. In December 2022, the proprietor of Twitter said that a recession would amplify if the Fed raised the involvement complaint and the cardinal slope accrued the rate. Musk besides insisted successful December that the Fed’s accelerated complaint hikes would spell down successful past arsenic 1 of the “most damaging ever.” After the 3 large U.S. banks failed successful March, Musk lambasted the Fed’s information latency and called for an contiguous driblet successful involvement rates.

What bash you deliberation the semipermanent effects of the caller slope collapses and alteration successful lending volition beryllium connected the U.S. economy? What bash you deliberation astir Elon Musk’s warning? Share your thoughts astir this taxable successful the comments conception below.

Image Credits: Shutterstock, Pixabay, Wiki Commons, Bloomberg Chart,

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