Bipartisan politics real cause of banking woes

The collapse of Silicon Valley Bank in the United States last Friday has sent shock waves through the global financial markets as investors scramble to weigh the ramifications of the meltdown of the largest bank since the 2008 global financial crisis.

The closure of Signature Bank on Sunday further fueled panic over the financial health of the country's banking system, even after the Joe Biden administration took emergency measures to guarantee deposits at both banks, with major US banks losing around $90 billion in stock market value on Monday, bringing their loss over the past three trading sessions to nearly $190 billion. The fact that the US has again become a source of financial risks that pose a threat to the global economy will inevitably diminish its leadership credibility.

Experts have attributed SVB's crash to its own misjudgments and high inflation. SVB loaded up on long-term debt such as Treasury bonds betting on a prolonged period of low interest, only to see the value of the bonds decrease as the Federal Reserve kept raising interest rates to fight high inflation. News about the huge losses the bank had suffered eventually caused a run on the bank.