Bloomberg News reported on the 28th (local time) that the next scapegoat of the US financial crisis, which began with the collapse of Silicon Valley Bank (SVB), is likely to be Charles Schwab, the largest brokerage firm in the US.
Bloomberg predicted this through an article titled, “Cracks are occurring in Schwab, which built a $7 trillion (about 9081 trillion) empire with low interest rates.”
Charles Schwab is a conglomerate financial group. In particular, it is strong in securities, securing about 12.7 million customers as the largest securities company in the United States. Its total assets reach a whopping $7 trillion.
Charles Schwab has nothing to do with SVB. However, it is facing a crisis due to the recent rapid rate hike by the Fed.
Bond yields (market interest rates) soared as a result of the Fed’s rate hike, which led to a surge in losses last year.
Like SVB, the company invested heavily in long-term bonds at the time of low interest rates in 2020 and 2021. But when the Fed raised interest rates aggressively, bond yields soared. As a result, large losses occurred.
In addition, as interest rates soar, customers are taking funds out of their accounts at brokerages and transferring them to their bank accounts en masse.
As a result, Charles Schwab’s liquidity crisis is escalating, Bloomberg reported.
Recently, Charles Schwab’s stock price has been plummeting every day. On the 28th, Charles Schwab’s share price recorded $53.85, down 1.84% from the previous trading day. As a result, the company’s share price has plunged 25% since March 8.
The company’s chief executive (CEO) is evolving the crisis, saying, “The company’s financial position is sound and it has sufficient liquidity to withstand widespread disruption.”
However, this is what financial CEOs repeat in every crisis. Rather, experts are unanimous in saying that such remarks prove that the company’s crisis is not serious.
Bloomberg predicted that if Charles Schwab went bankrupt, it would have a different impact than SVB. SVB is a local bank located in Silicon Valley, but Charles Schwab is a securities company representing the United States.
Charles Schwab’s total wealth is approximately $7 trillion. SVB’s total assets are only $209 billion.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.