Banking crisis could severely tighten lending for US households, businesses

Published

2 years ago

March 27, 2023

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close video Fed is going to keep raising rates, Jim Rickards warns

Strategic Intelligence editor Jim Rickards discusses the Fed’s decision to raise rates by 25 basis points, arguing that policymakers are “determined” to get inflation under control.

The worst banking crisis since the Great Recession could severely tighten credit for U.S. households and businesses, taking a toll on economic growth.

The turmoil that has engulfed the financial system following the stunning collapse of Silicon Valley Bank and Signature Bank has raised the prospect among economists that lending standards will become drastically more restrictive in coming months.

"Tighter conditions can happen and occur outside the official tightening of the Fed funds rate. There are so many other variables," Jeffrey Roach, chief economist at LPL Financial, told FOX Business. "A banking crisis, in essence, can tighten conditions… I think it’s fair to say that the current banking crisis could also be an equivalent to say, a 50-basis-point rate hike."

During a credit crunch, banks significantly raise their lending standards, making it difficult to acquire a loan. Borrowers may have to agree to more stringent terms like high interest rates as banks try to reduce the financial risk on their end. Fewer loans, in turn, would lead to less big-ticket spending by consumers and businesses.

FUND MANAGERS WORRY SYSTEMIC CREDIT CRUNCH COULD CRASH US MARKETS

Employees walk outside the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023, in Santa Clara, California. (Justin Sullivan/Getty Images / Getty Images)

Gregory Daco, chief economist at the consulting firm EY-Parthenon, said he thinks tighter credit will constrain "business investment, employment growth and consumer spending in the coming months."

While that could help the Federal Reserve in its fight to tamp down stubbornly high inflation, it also raises the risk of a recession this year.

"The odds of a recession have risen due to heightened financial market volatility, tightening credit conditions and economic uncertainty," Daco said. "While labor market conditions still look relatively resilient, an abrupt shift in sentiment along with a rapid tightening of financial conditions could push the economy into a recession with businesses and consumers retrenching."

JEROME POWELL'S FAVORITE BOND MARKET GAUGE FLASHES RECESSION WARNING SIGN

Chairman Jerome Powell acknowledged during the Fed's two-day meeting last week that upheaval within the financial sector could tighten credit for American households. He suggested that stricter lending standards could have a similar effect on inflation that a rate increase can.

"Such a tightening in financial conditions would work in the same direction as rate tightening," Powell said. "You can think of it as being the equivalent of a rate hike or perhaps more than that."

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during at a news conference in Washington, D.C., Wednesday, March 22, 2023. (Al Drago/Bloomberg via Getty Images / Getty Images)

His comments came shortly after policymakers delivered another quarter-percentage point rate hike, lifting the benchmark funds rate to a range of 4.75% to 5%, the highest since 2007. It marked the ninth consecutive rate increase aimed at combating high inflation.

Fed officials are in the midst of the most aggressive tightening campaign since the 1980s as they try to crush inflation still running about three times higher than the pre-pandemic average. Before the spate of bank collapses earlier in March, the Fed had considered raising rates by a half-percentage point in the face of strong economic data, Powell said Wednesday.

But fears over a broader financial crisis complicated the Fed's efforts, because the rapid rise in interest rates played a direct role in the failure of Silicon Valley Bank. Increasing interest rates threatens to exacerbate instability within the financial system. Powell said it is too soon to say how banking sector stress will affect the broader economy.

YELLEN SAYS US WILL TAKE MORE ACTION TO PROTECT SMALLER BANKS IF NEEDED

"Financial conditions seem to have tightened and probably by more than the traditional indexes say," he said. "The question for us, though, is how significant will that be – what will be the extent of it, and what will be the duration of it?

"We’ll be looking to see how serious is this and does it look like it’s going to be sustained. And, if it is, it could easily have a significant macroeconomic effect, and we would factor that into our policy decisions."

Pedestrians near the U.S. Treasury building in Washington, D.C., Dec. 30, 2022. (Ting Shen/Bloomberg via Getty Images / Getty Images)

SVB largely catered to tech companies, venture capital firms and high net worth individuals who were pulling cash at a rapid pace as the once red-hot tech sector cooled. When the bank announced it was trying to raise capital from investors and that it would take a $1.3 billion loss on long-term securities that had tumbled in value amid higher interest rates, depositors panicked and a bank run ensued.

Within days, U.S. regulators took extraordinary steps to contain the fallout from the bank's collapse and shore up wavering confidence in the financial system, including protecting all deposits at the two institutions – even those holding funds that exceeded the FDIC's $250,000 insurance limit.

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The Fed also launched a new emergency backstop for lenders to help them meet deposit withdrawals under favorable terms.

Environment

State of New York commits $21 million to support zero-emission mobility

Published

4 hours ago

August 3, 2025

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State of New York commits million to support zero-emission mobility

Governor Hochul Announces More Than $21 Million is Now Available to Support Zero-Emission Mobility Transportation Solutions

While the Trump Administration walks back emissions standards and pretends science isn’t real, New York Governor Kathy Hochul is announcing plans to improve the quality of life for her constituents by investing over $21 million in support of zero-emission mobility and transportation solutions across New York State.

New York’s newly announced Clean Mobility Program will provide funding for scalable, community-led demonstration projects highlighting micro mobility, ride sharing, and community-managed “on-demand shared transportation” options.

The Governor’s office believes these solutions could help lower air pollution in the state while offering residents affordable connections to services, jobs, and transit. Objectively needed wins, in other words – and even more needed in traditionally underserved communities.

Governor Hochul gets it

NY Governor Kathy Huchul, via governor.ny.gov.

“Even as the federal government walks away from clean air and energy standards, New York continues to invest in modern, flexible and efficient electric transportation options that improve air quality and expand affordable consumer choices,” explains Governor Hochul. “Our priority is linking communities, including areas that have been historically marginalized, with resources that provide residents with a variety of flexible transportation options that allow them to conduct their daily business uninterrupted.”

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The program is the latest of the state’s recent EV funding initiatives, and the official release (on the New York State website) announced more details about The Clean Mobility Program:

The Clean Mobility program offers up to $21.6 million for projects across New York State and will award up to $3 million per project, with priority given to projects in disadvantaged communities, as defined by the Climate Justice Working Group.

Additionally, up to $8 million is set aside to fund demonstration projects located in specific areas of the state, including those served by the upstate investor-owned utilities. This includes a total of up to $5 million for micro mobility projects in the Central Hudson, National Grid, New York State Electric & Gas, and Rochester Electric & Gas region and up to $3 million for any type of eligible demonstration projects located in the Bronx.

NEW YORK STATE

Proposals for demonstration projects must include a completed planning document that includes community engagement, site identification and operations, project partner identification, technical feasibility assessment, and a policy and regulatory feasibility assessment. Any e-bikes or e-scooters deployed in these projects must meet industry and state safety standards to be eligible.

Proposals are due on September 25, 2025 by 3:00 PM EST. For more information on this funding opportunity please visit the NYSERDA’s website.

Electrek’s Take

New York City; by Benny Rotlevy, via Unsplash.

Times Square banned cars in 2009 and New York City implemented congestion pricing earlier this year, angering exactly the right people in exactly the right way for exactly the right reasons. In both cases, the plans worked, the problems were solved for, and the lives of the people of New York improved. Governor Hochul’s latest plan is sure to be the latest in an ever-growing line of green success stories.

SOURCE | IMAGES: New York State.

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US

Tennessee: Man tries to detonate 14 explosive devices while being arrested

Published

4 hours ago

August 3, 2025

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Tennessee: Man tries to detonate 14 explosive devices while being arrested

Police in Tennessee have discovered 14 improvised explosive devices in a man’s home as they were arresting him, the local sheriff’s office said.

Officers were executing a warrant in the home of Kevin Wade O’Neal in Old Fort, about 45 miles (70km) east of Chattanooga, after he had threatened to kill public officials and law enforcement personnel in Polk County.

After arresting the 54-year-old, officers noticed “something smouldering” in the bedroom where he was found.

On closer inspection, they discovered an improvised explosive device and evacuated the house until bomb squad officers arrived at the scene.

Fourteen devices were found inside the property – none of which detonated.

O’Neal was charged with 11 counts of attempted first-degree murder, corresponding to nine officers and two other people inside the property when the suspect tried to detonate the devices.

He also faces 14 counts of prohibited weapons and one count of possession of explosive components.

O’Neal is being held at the Polk County jail and his bond is yet to be determined.

Entertainment

Strictly Come Dancing: BBC responds as two TV stars accused of taking cocaine

Published

5 hours ago

August 3, 2025

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Strictly Come Dancing: BBC responds as two TV stars accused of taking cocaine

The BBC has responded after it was reported that two Strictly Come Dancing stars have been accused of taking cocaine.

The broadcaster is said to have hired an external law firm to probe the drug-taking allegations, which a source said were “well-known” on the show, The Sun on Sunday reports.

The claims were reportedly made on behalf of celebrity contestant Wynne Evans in a legal submission to the BBC in March.

In response, a BBC spokesperson told Sky News: “We have clear protocols and policies in place for dealing with any serious complaint raised with us. We would always encourage people to speak to us if they have concerns.

“It would not be appropriate for us to comment further.”

Sky News understands that it is not unusual for the BBC to engage an external individual to provide additional expert resource to help deliver a BBC-led investigation. In these cases, they would report to an established BBC team.

The allegations published in The Sun on Sunday include a source saying that one Strictly star had told another about a third celebrity on the show: “Have you seen their pupils… they’re off their face.”

“The BBC have known about these allegations for some time, and acknowledged receiving them. Now they are taking firm action,” the source reportedly said.

The two individuals accused of drug taking have not been named.

It is the latest crisis to hit the BBC and Strictly.

In July last year, Amanda Abbington accused Strictly dancer Giovanni Pernice of “abusive or threatening behaviour”. The actress, who was paired with Pernice, withdrew from the show in 2023.

The BBC upheld “some, but not all” of the allegations, with Abbington describing an apology from the corporation as a “vindication”, while Pernice denied displaying “abusive or threatening behaviour”.

Also in July 2024, Strictly professional dancer, Graziano Di Prima confirmed he was leaving the show amid reports of alleged misconduct.

Separately, Laura Whitmore alleged “inappropriate behaviour” during her time on the show.

In January this year, Welsh opera singer Wynne Evans made “inappropriate and unacceptable” comments at the Strictly Come Dancing live tour launch, for which he later apologised.