Loews CEO James Tisch uses a famous Warren Buffett quote to explain the banking fiasco - and warns more lenders may get into trouble.
"We actually ran into a nudist colony here, in terms of banks all over doing that sort of thing," Buffett said.
Their customers grew worried about the safety of their money and withdrew it in droves, forcing the Federal Deposit Insurance Corp. to seize both lenders and guarantee all of their deposits. First Republic also saw more than $100 billion of deposit outflows in the first quarter, and wasThe bank turmoil in early March was a"calamity" that raised the terrifying prospect of a sweeping run on American banks, Tisch said.
However, Tisch warned of more trouble ahead. Regulators still haven't guaranteed bank deposits beyond the FDIC's $250,000 limit, he noted, meaning smaller lenders remain at a competitive disadvantage to peers that are"too big to fail."In response to inflation hitting a 40-year high last year, the Fed has hiked interest rates from nearly zero to about 5% within the past 14 months.
Higher rates also encourage saving over spending, and increase borrowing costs for consumers and businesses more broadly, raising the risk of an economic slowdown or recession.
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