- Bill Ackman, Jeffrey Gundlach, Mohamed El-Erian and others are warning the banking turmoil is far from over.
- Chaos has ripped through the sector for the past two months, causing four lenders to collapse so far.
- Here are some of the most recent warnings from high-profile investors, analysts and other experts.
Over the past week, First Republic Bank became the fourth US lender to fold up this year, fueling a selloff in regional bank stocks. That’s prompting top economists and investors to once again warn that the banking turmoil is far from over.
Big names from Bill Ackman to Jeffrey Gundlach and Mohamed El-Erian have voiced renewed concerns about the stability of America’s mid-sized banks, as PacWest Bancorp became the latest institution to face scrutiny after it said it was weighing strategic options after abandoning a previous effort to raise capital.
The US banking sector has faced heightened uncertainty since the collapse of Silicon Valley Bank and Signature Bank in March, with the recent fall of First Republic Bank and its subsequent takeover by JPMorgan further fueling concerns about the sector’s stability.
Below is a selection of the most recent warnings on US banking risks from high-profile investors, analysts and other experts.
Bill Ackman, billionaire investor
“The FDIC’s failure to update and expand its insurance regime has hammered more nails in the coffin,” Ackman said Wednesday on Twitter. First Republic “would not have failed if the FDIC temporarily guaranteed deposits while a new guarantee regime were created. Instead, we watch the dominoes fall at great systemic and economic cost,” he said.
“We are running out of time to fix this problem. How many more unnecessary bank failures do we need to watch before the FDIC, US Treasury, and our government wake up?” he added. “We need a systemwide deposit guarantee regime now.”
Jeffrey Gundlach, DoubleLine CEO
“Deposits are going to keep drifting out, I don’t think that this is the last chapter in this regional banking problem… I don’t really see what’s gonna make it stop unless the Fed cuts interest rates,” Gundlach told CNBC’s “Closing Bell”.
Mohamed El-Erian, Allianz chief economic adviser
“I fear that this may end up being added to the list of unfortunate Federal Reserve communications over the last few years that have eroded the credibility of the Fed, undermined its policy guidance/effectiveness, and risked its political autonomy,” El-Erian said in a Thursday tweet. He was raising doubts about Federal Reserve chair Jerome Powell’s suggestion during a Wednesday press conference that the worst of the banking turmoil is over.
Paul McCulley, former PIMCO chief economist
“The economy slowed. Inflation is going in the right direction. We have a chronic-wide banking issue,” McCulley told CNBC on Wednesday.
McCulley said the “acute phase” of the banking crisis, wherein lenders collapse and spark panic among Wall Street investors, is starting to wind down. But the economy is now about to face the “chronic phase” of banking issues, as banks that weathered huge losses over the past few months are expected to pull back on lending, causing credit conditions to tighten and slow the economy even further, according to him.
“We have this chronic condition that I think is a really tight vise on MainStreet lending,” he warned.