“The Fed needs to hit pause and assess the full impact of its actions so far before raising short rates further,” Bair, the former chair of the Federal Deposit Insurance Corporation, told CNN on Sunday in a phone interview. “If they paused, it would have a settling effect on the markets,” said Bair, who led the FDIC through the 2008 failure of Washington Mutual. Silicon Valley Bank is second only to Washington Mutual in terms of the biggest bank failures in US history.
Secondly, the Fed’s rate hikes undermined the value of the Treasury bonds that banks rely on as a central source of capital. “When money gets tighter, financial assets lose value. That has to be carefully managed,” said Bair, who led the FDIC during a wave of bank failures during the 2008 global financial crisis. As of the end of last year, US banks were sitting on $620 billion in unrealized losses , according to FDIC data. Those assets could lose further value if the Fed keeps raising rates.
Stop printing money.