EDITOR NOTE: Just how robust is the banking system in the event of an unexpected shock? Perhaps we can find an ounce of truth in the opinion of the most “dovish”member of the Federal Reserve--Neel Kashkari. When prompted by the question “are the banks strong enough,” his answer was quite clear and damning: no, they are not. The banking sector’s losses during the pandemic were small because of the government’s aggressive fiscal stimulus. In other words, the government bailed out banks, in every crisis, indirectly by bailing out households whose financial woes would have caused banks to undergo severe strain, possibly collapse. Kashkari continues, "The public must decide: should banks be resilient on their own or always dependent upon the generosity of taxpayers?" This is one area in which we agree with you, Mr. Kashkari. Yet the smartest move would be to hedge your assets against banking shenanigans and central bank folly by taking your money out of the system altogether and converting it into real capital that’s private and sound--non-CUSIP physical gold and silver, where wealth can maintain its purchasing power away from corrupt banking and government practices that only reduce its value.
[BENGALURU] Banks cannot expect the government to bail them out of every crisis and must increase their equity funding to protect against the next "unexpected shock", Minneapolis Federal Reserve President Neel Kashkari wrote in an op-ed for the Financial Times.
Mr Kashkari wrote in the newspaper on Monday that the losses in the banking sector were far smaller than his analysis during the Covid-19 pandemic.
"Does their performance during the Covid downturn indicate that large banks are strong enough? No, it does not," he wrote, adding that the losses in the banking sector were much smaller than expected because governments were aggressive in providing fiscal support for families and businesses affected by the crisis.
While Mr Kashkari said it was right on the part of fiscal authorities to support the economy during the Covid-19 downturn, he added that "this was also a banking bailout". "Absent these fiscal interventions, losses in the banking sector would have been much larger," he wrote in the newspaper.
"The public must decide: should banks be resilient on their own or always dependent upon the generosity of taxpayers?"
Original post from The Business Times