When we have a problem
The old saying that “if you owe the bank £1,000 you have a problem, if you owe the bank £1,000,000 they have a problem” is coming true again.
In short, regional American banks especially if they specialise in the tech sector, are falling like ten pins because the market no longer trusts their business model.
So far this has been a chance for larger banks to hoover up the smaller ones and make a huge profit. But as we saw in 2008 it does not take much to undermine confidence in the whole sector, and since everyone can still remember 2008 very well, the prospect should terrify us all.
The most worrying aspect is that the sector is supposed to have been reformed since 2008 and be much better regulated.
But I remember the bankers calling for the dead hand of regulation to be lifted months after the crash and it is now 15 years later. How can these banks have such shallow resources and have lent to such risky businesses, without someone spotting they were heading for a fall?
It feels like the regulators have been captured again. Let’s hope not.
Economics, trade and Brexit, not necessarily in that order but the dog always comes first.