WASHINGTON, March 22 (Bernama-Sputnik) - The United States may see another fifty bank failures if the US government does take appropriate action to resolve structural issues, former Lehman Brothers executive Lawrence McDonald told Sputnik.
Earlier in March, the US saw the second and third largest bank failures in the country’s history, forcing the federal government to take emergency measures and guarantee deposits. Many attribute the collapse of Silicon Valley Bank (SVB) and New York's Signature Bank to soaring interest rates, which the Federal Reserve is widely expected to raise for the ninth time later on Wednesday.
"Yeah, because it's just after the financial crisis, and this all goes back to Lehman," McDonald said when asked if more US banks may be expected to collapse.
"So Lehman failed and then it forced this too big to fail system, and then now this interest rate shock to the regional banks is moving hundreds of billions of dollars out of regional banks into the big banks... So you could have another 50 bank failures... unless they fix the structural problem."
McDonald, who served as the vice president of distressed debt and convertible securities trading at Lehman Brothers, added that Washington may be forced to put forward a much larger backstop that covers deposits larger than US$250,000.
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