Since March, the Biden administration has overseen the third-largest bank failure in U.S. history. The failure is a result of high-interest rates and poor management decisions, which led to the collapse of three major banks. The resolution of the failures is estimated to cost taxpayers about $36 billion.
According to experts, the Federal Reserve’s interest rate regime could cause additional problems across the sector. The government’s increasing willingness to use taxpayer money to bail out these institutions has set a bad incentive for private banks to acquire or bail out these failing institutions.
Economist Thomas Hogan noted that large banks would wait until the banks failed before the government provided a bailout package to make the acquisition possible. The precedent set will make private banks less willing to acquire or bail out failing institutions.
The bank failures are largely blamed on interest rate hikes that the Federal Reserve has pursued over the last year. Economist Stephen Moore stated that the Fed had to take these actions because of the extraordinary spending spree after COVID was over, leading to inflation rising to 9%.
In conclusion, the Biden administration’s inconsistent operations in financial markets have led to three of the four largest bank failures in U.S. history. With the banking system still at risk, the government must strengthen the rules for banks to protect American jobs and small businesses.
Source Fox News