The chief investment officer at J.P. Morgan Asset Management says that the crisis in the country’s banking industry is not done claiming victims.
In a new Bloomberg Television interview, Bob Michele says that the banking crisis will not stop with troubled bank First Republic.
According to the Michele, regional banks are keeping their heads above water with the support of two key government programs.
He says that these banks could altogether shutter their doors if the government decides to pull the plug.
“Well, I think we have both [a banking problem and a First Republic problem]. And I think it’s somewhat naive to say that this is just limited to First Republic.
If you step back and think about it, this should never have happened. This (happened) in of the most heavily regulated, capitalized industry on the planet – banking. And the regional banking system I think is quite vital to the US.
So I think it is a crisis. I think the regional banks are heavily dependent on the FDIC (Federal Deposit Insurance Corporation). They’re heavily dependent on the Federal Home Loan Bank to get additional cash. We don’t know how they’re going to operate when those two programs expire.”
Earlier this week, shares of First Republic crashed 50% in a matter of hours after news erupted that customers of the San Francisco-based bank yanked out $100 billion worth of deposits in March.
The US government was expected to bail out the ailing bank but a report noted that officials are currently “unwilling to intervene in the First Republic rescue process.”
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