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IPFS News Link • Central Banks/Banking

Are Bank Failures a Sign of More Trouble Ahead?

• http://www.ronpaulinstitute.org, by ron paul

First Republic Bank also seemed on the edge of collapse until Bank of America, Citigroup, and other big banks agreed to jointly fund a bailout for it.

Major Swiss bank Credit Suisse was also teetering on the brink when it received a 54 billion dollars line of credit from the Swiss UBS Group last week. Now, UBS is in the process of buying Credit Suisse. Politicians, regulators, and financial "experts" all rushed to assure us these problems were all caused by factors unique to the individual banks and were not a sign of a systemic weakness in the banking system.

The bank failures and near failures caused nervous banks to borrow a combined 164.8 billion dollars in one week from the Federal Reserve's discount window and the Bank Term Funding Program, a new program created by the Fed to make loans to troubled banks. The Fed created this program even though supposedly there is no systemic problem in the banking industry.

While SVB didn't receive a bailout, the Federal Deposit Insurance Corporation (FDIC) guaranteed the full amount of all deposits even though Congress set a standard FDIC guarantee on deposits of up to 250,000 dollars. By covering all SVB deposits, the FDIC has created an expectation among depositors at major financial institutions (as well as the institutions themselves) that the government will cover 100 percent of deposits.


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