For the Biden administration and Congress, the problems facing Credit Suisse Group AG have nothing to do with the US economy.
(Bloomberg) — For the Biden administration and Congress, the problems facing Credit Suisse Group AG have nothing to do with the US economy.
US regulators are consumed by the task of steadying their country’s own financial stability following the collapse of three regional banks and as First Republic Bank gets a rescue deal. A banking crisis in Europe seems literally an ocean away.
That much is apparent from the reaction from the White House, lawmakers and US regulators to Credit Suisse’s mounting woes: It’s unrelated to their own turmoil back home.
Treasury Secretary Janet Yellen was not asked once about Credit Suisse as lawmakers on the Senate Finance Committee quizzed her for hours about Silicon Valley Bank and how to protect deposits.
White House Press Secretary Karine Jean-Pierre was at pains on Thursday to say: “I want to be very clear: What we’re seeing with Credit Suisse is a distinct situation. It does not speak to the current economic environment that we’re in.”
While the circumstances are indeed different, nevertheless the mounting difficulties of the banking system across both sides of the Atlantic has raised the inevitable specter of the 2008 financial crisis and the question of whether parallel storms can be kept on separate tracks or will at one point converge.
The Credit Suisse situation shook global investors and added to the market turmoil spurred by the failure of Silicon Valley Bank and Signature Bank. A third regional institution, First Republic Bank, is poised to get as much as a $30 billion lifeline from larger US banks, after its shares also plummeted this week.
Jean-Pierre said the US Treasury Department is in touch with its Swiss counterparts about the lender and US officials were “glad” that the Swiss central bank “provided a reassurance in the form of the loan facility yesterday.”
Credit Suisse’s stock suffered its biggest one-day drop on record after a top shareholder ruled out adding to its stake on Wednesday, spooking investors. The troubled lender won a 50 billion franc ($54 billion) credit line from the Swiss National Bank, stemming the collapse in investor confidence and giving executives and government officials in its home country more time to plan their next steps. The bank is in the middle of three-year restructuring.
The US Treasury Department on Wednesday said it was actively reviewing the US financial sector’s exposure to Credit Suisse, with officials in close contact with the Federal Reserve and European regulators.
But on Thursday the focus of Yellen’s testimony was firmly on SVB: “I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them.”
She said her department is watching for any signs of tightening credit and focused on ensuring financial stability, but acknowledged that regulators would also need to “reexamine our rules and supervision” after SVB’s collapse.
Earlier: US Treasury Reviewing US Banks’ Exposure to Credit Suisse
(Updates with additional background, details throughout)
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