The probability of a recession occurring in the United States is now certain amid a financial crisis rooted in interest rate hikes that led to the second and third largest bank failures in US history, former Lehman Brothers executive Lawrence McDonald told Sputnik
WASHINGTON (Pakistan Point News / Sputnik - 22nd March, 2023) The probability of a recession occurring in the United States is now certain amid a financial crisis rooted in interest rate hikes that led to the second and third largest bank failures in US history, former Lehman Brothers executive Lawrence McDonald told Sputnik.
On March 10, federal regulators seized Silicon Valley Bank (SVB) - the largest US bank to collapse since the 2008 financial crisis and the second largest implosion in the country's history. Two days later, the New York-based Signature Bank was seized in the third largest bank collapse in US history, which forced the federal government to take emergency measures and guarantee deposits to stem the crisis.
"There's a loss of confidence. Financial conditions rips tighter, so the consumer is wounded," McDonald said. "This is in the process of wounding that (current US consumer) boom. The probability of recession is now, I think, certain."
McDonald, who served as the vice president of distressed debt and convertible securities trading at Lehman Brothers, said the Federal Reserve's strategy to raise interest rates to combat inflation is essentially creating "another fire."
Later on Wednesday, the US Federal Reserve is widely expected to raise interest rates for the ninth time since last March.
