Fed Chairman Jerome Powell's claims about the "resilient" US banking sector strike back at him as the stock prices of regional banks plummet.
US regional bank shares took a nosedive in after-hours trading on May 3rd, even though Federal Reserve Chairman Jerome Powell had just labeled the US banking system as "sound" and "resilient."
For example, PacWest Bancorp saw its shares plummet by a jaw-dropping 52.5% following a Bloomberg report revealing the bank's exploration of strategic options. This development raised concerns that PacWest could be the next victim of the ongoing US banking crisis. Insiders cited by Bloomberg claim the bank is weighing options such as a sale or capital raising.
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Other regional banks like Western Alliance Bancorp, Metropolitan Bank, and HomeStreet also faced notable declines, with their shares falling by 22.4%, 16.2%, and 7.8%, respectively.
Metropolitan Bank, which once served crypto firms, closed its digital asset division in January due to discontent with the trajectory of the cryptocurrency industry. In contrast, Western Alliance Bancorp has adopted blockchain-based payment solutions for its clientele through its blockchain and digital asset department.
Powell's declaration of the banking sector's stability coincided with his announcement of a 25 basis point hike in interest rates. Fed chairperson noted:
Conditions in <the banking> sector have broadly improved since early March, and the US banking system is sound and resilient. We will continue to monitor conditions in the sector.
Additionally, Powell emphasized the Fed's dedication to learning from past experiences to avert future catastrophes.
Yet, these statements were made shortly after the collapse of First Republic Bank, marking the second-largest bank failure in recent history. Its shares nosedived 20% within hours of the government receivership announcement on April 26th.
Crypto Twitter users mocked Powell for claiming the banking sector had generally improved since early March.
Founder of digital asset analysis firm Reflexivity Research, Will Clemente, sarcastically applauded the robustness of a banking system that had experienced the collapse of five banks, including SVB, Silvergate, Signature, First Republic, and PacWest.
Former Coinbase CTO Balaji Srinivasan has recently called off his $1 million Bitcoin (BTC) bet, claiming that his $1.5 million donation is a "costly signal" informing the community that "there’s something wrong with the <US> economy."
