The bankruptcy of the two large banks of the USA, Silicon Valley Bank and Signature Bank, caused a crisis of confidence that spread to the regional banks of the USA. European financial institutions may further slow down economic growth which began to pose a serious threat to lending standards that could plunge both the US and European economies into recession.
In 2022, the US Federal Reserve raised interest rates to an all-time high to tighten credit conditions and rein in inflationary trends. As a result, the value of long-term Government bonds held by banks and other debt such as Mortgage-Backed Securities (MBS) fell. According to experts, large withdrawals by depositors will force banks to sell these securities at high losses.
In the US housing market, further restrictions on Purchase, Development and Construction (AD&C) loans for contractors across the country, pressure on regional banks and the Fed's continued tightening are expected to have a knock-on effect. The automotive industry also may face new challenges as finances become more difficult and people delay large purchases.
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