Analysis of the News “Will the US banking sector collapse”

March 2023

As part of the program Regional Initiative to Combat Disinformation, we present you a new analyses of fake news and disinformation narratives.

Will the US banking sector collapse

After the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank in the United States of America, numerous disinformation and doubts about the US financial system appeared in the Serbian media. It is interesting that the Russian media is the main source for this kind of news.

Sputnik published the news in which it conveys the opinion of consultant Branko Pavlović regarding the bankruptcy of Silicon Valley Bank (SVB). Pavlović declares that “the fact that this bank (SVB) by itself has no importance for the financial system and its collapse cannot spill over and create some kind of chaos, but it does not mean that chaos is ruled out, that it will not happen” and assesses that the joint statement of the US Department of the Treasury, the Federal Reserve and the Federal Deposit Insurance Agency indirectly confirms the depth of the problem that exists in the financial sector of America. And not only American, but the entire Western world.

In the following days, Sputnik portal continued to report on the collapse of the American financial system and on March 16 published the news entitled “Hedge fund manager: American capitalism is breaking down before our eyes”. The news reports the opinion of hedge fund manager Ken Griffin that “the American capitalist economy breaking down before our eyes”. The text further conveys the statements of Canadian businessman Kevin O’Leary and American commentator Liz Wheeler.

“What effectively happened over the weekend is that Biden nationalized the American banking system,” O’Leary told CNN, adding that the banks are now backstopped by the government, ultimately, the taxpayer.  Despite the fact that the Federal Deposit Insurance Corporation will review the collapse of SVB, and the Treasury spokesperson claimed that citizens will not end up paying the rescue bill: “For banks that are bankrupt, funds from the Deposit Insurance Fund will be used. The risk is borne by the Deposit Insurance Fund. These are not taxpayers’ money.”

On the other hand, Sputnik also reports the statement of the controversial American conservative commentator Liz Wheeler, who disagrees with this claim. “It’s not directly from taxpayers. But FDIC is composed of banks. Those banks will foot the bailout bill. Then they’ll pass that cost to consumers. That’s you.”

Also, numerous theories of the reasons for the collapse of banks appeared in the Serbian media, and one of them was published by the pro-Russian portal Webtribune. The portal reports the Telegram post of the head of the Institute for Political Studies, Sergey Markov.

“The failed American bank Silicon Valley Bank, because of which the whole world is so afraid of the global economic crisis, is connected to Ukraine. Through this bank, the Pentagon bought Soviet weapons all over the world for transfer to the Ukrainian armed forces. Why do many things related to Ukraine fail? Because modern Ukraine, i.e. the Ukrainian project with its denial of rights, democracy, humanism and just civilization, is such a project of the American “deep state”, in which only deeply immoral people without conscience can participate. And such people, as a rule, steal a lot. And projects in which a lot of theft is done, as a rule, fail,” wrote the expert on his Telegram channel “Logika Markova”.

The reason for the bankruptcy of SVB is definitely not the conflict in Ukraine. Silicon Valley Bank’s services have been in high demand over the past years, especially in the early 2020s, in particular in the technology sector, IT sector, for start-ups and established technology companies, as consumers, due to the pandemic, started buying and investing in smart devices and digital services. Many tech companies used SVB to hold cash that they used for salaries and other business expenses, which led to an influx of deposits. The bank has invested a large part of the deposits, which is usual. The beginning of its collapse was the moment when the bank invested heavily in long-term US government bonds, including those backed by mortgages. The problem is that with the central bank’s turn in interest rates, yields have risen, but bond prices have fallen. If the bonds are sold, the drop in exchange rates leads to losses for the bank. That is why the bank tried to carry out an urgent recapitalization, but it did not succeed. While SVB’s problems stem from their earlier investment decisions, on March 8 a bank run started that significantly accelerated the bank’s collapse. At that time, clients practically stormed to the banks in order to put their savings in a safe place, i.e. to withdraw all their money, which led, so to speak, to drying up, i.e. to the rapid bankruptcy of the bank.

Another bank that found itself on the brink of bankruptcy this month was Credit Suisse, a bank from Switzerland. Credit Suisse is a bank that has been in trouble for the past 15 years, with a series of scandals and losses in questionable deals. However, the trigger for what is happening now is the statement of the representative of the Saudi National Bank (SNB), the largest shareholder of Credit Suisse with 9.9 percent, who, when asked whether to help the bank with capital, answered that they would not, due to regulatory reasons (because they cannot cannot go above 10% ownership).

However, a different interpretation of this event and the actions of the Saudi National Bank is reported by RT Balkan. This Russian media reports the statement of the American lawyer, economist and investment banker James Rickards, who explains the reason for the collapse of this bank due to the aggressive performance of Credit Suisse Bank in freezing Russian assets and implementing sanctions. “Then China joined Russia. China is Saudi Arabia’s biggest customer. Then Saudi Arabia refused to save Credit Suisse. Now ‘Credit Suisse’ is de facto nationalized. See how it all works?” Rickards writes.

The Credit Suisse bank crisis was overcome by the purchase of this bank by the Swiss bank UBS for $3.25 billion.