What Really Broke the Banks
The Fed, among others, is blameworthy. But the ultimate culprit is COVID-19.
When the Federal Reserve board last met, at the end of January, its main concern was whether it needed to continue hiking interest rates aggressively in order to bring down inflation. When it met yesterday, it had a whole new pile of concerns, including, most importantly, whether further interest-rate hikes would destabilize more banks and aggravate the mini banking crisis we’ve been living through since the failure of Silicon Valley Bank on March 10. Those concerns help explain why, even with inflation still high, the Fed chose to raise rates only a quarter of a point.
The fact that six weeks ago almost no one was talking about banks’ balance sheets, let
