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The US banking crisis will slow economic growth


The US banking crisis will slow economic growth

Monday – 28 Shaaban 1444 AH – 20 March 2023 AD Issue number [

Silicon Valley Bank logo torn next to the American flag (Reuters)

Washington: «Asharq Al-Awsat»

Lloyd Blankfein, former CEO of Goldman Sachs, said yesterday (Sunday) that the banking crisis in the United States will accelerate the tightening of the overall credit policies, and lead to a slowdown in the American economy.
He added, in an interview with the American “CNN” network: “It is certain that this situation … will lead, one way or another, to something like raising interest rates. The banks, you know, because of the stress and the pressure and the uncertainty… will have to use their stocks” to deal with their crisis.
He explained that «the banks will reduce lending against their deposits, and therefore credit will actually decrease. Fewer loans mean less growth. Therefore, some of the tasks of the Federal Reserve (the US Central Bank) related to trying to slow the economy will be implemented here (in banks).
Financial stocks have lost billions of dollars in value since the collapse of Silicon Valley and Signature banks this month. On Friday, US President Joe Biden said that the banking crisis had subsided, as he assured Americans that their deposits were safe.
Gary Cohn, who worked as an economic advisor to former President Donald Trump and was also president of Goldman Sachs, told CBS News that Fed Chairman Jerome Powell is in a “difficult situation.”
Cohn and Blankfein supported expectations that the central bank would raise interest rates by 0.25 percent this week, but added that it may need to pause and re-evaluate after that to give itself room to move forward.
The group of economists at Goldman Sachs was among the first to predict that the banking turmoil would push the US central bank to abandon interest rate hikes during its meeting this week on Tuesday and Wednesday.


American economy