How the Fed's Interest Rate Hike Contributed to Bank Failures

The Federal Reserve's recent decision to increase interest rates has been a point of contention for many, with some arguing that it has had a negative impact on the economy. One of the most significant consequences of this decision has been the increased number of bank failures across the United States.

The Fed's decision to increase interest rates means that banks now have to pay more to borrow money from the central bank. This, in turn, has increased the cost of loans for consumers and businesses. Higher interest rates can be beneficial for savers, but they can also lead to a decrease in spending and investment, which can ultimately hurt the economy.

In addition to this, the increase in interest rates has also had a direct impact on banks themselves. Banks are typically able to generate revenue by borrowing money at lower rates and lending it out at higher rates. However, with interest rates on the rise, the spread between borrowing and lending rates has decreased, making it more difficult for banks to turn a profit.

As a result, smaller banks, in particular, have struggled to keep up with the increased costs of borrowing, leading to a rise in bank failures. In 2021, five banks failed, and this number could continue to rise as interest rates continue to increase.

Since January 2021, several banks have failed in the United States, with many citing the impact of rising interest rates as a contributing factor. One such bank is the City National Bank of New Jersey, which was closed by regulators in February due to concerns over its financial condition. In March, the First State Bank of Barboursville in West Virginia was also closed, with the Federal Deposit Insurance Corporation (FDIC) citing the bank's "unsound banking practices." The FDIC also closed the The First State Bank of Bedias in Texas in March due to issues with liquidity and loan problems. These recent bank failures highlight the impact that rising interest rates can have on the stability of financial institutions, and the potential risks associated with Chairman Powell's current Fed policy.

Furthermore, the increase in interest rates has also made it more challenging for banks to attract new customers and retain existing ones. With higher interest rates, consumers are less likely to take out loans or use credit cards, leading to a decrease in revenue for banks. This decreased demand for loans can lead to a decrease in lending activity and potentially harm the economy.

In conclusion, while the Fed's decision to increase interest rates may have been made with good intentions, it has had unintended consequences, including an increase in bank failures. While it's essential to balance economic growth with financial stability, policymakers must be mindful of the potential consequences of their decisions, particularly when it comes to raising interest rates

Bad Finance: Debt doesn't work for gov or people.

Here we go again Obama is not even in office yet and he is endorsing another bail out plan. The US keeps spending more and more money that in effect it doesn't have. So what do we do? We print more money. With more and more money in circulation, each dollar is worth less and less. When each dollar is worth less and less, the the cost of goods and services become more and


So every time the government spends more and prints more money, your saving is devalued in your bank account. Keep in mind that the money is basically created out of thin air. There is no gold standard to back up the value of the money.

Now is where it gets tricky. When the Federal Reserve pumps more money into the economy by loaning money to banks who in turn loan money to corporations and individuals, they are in effect stealing from us. Because the banks can then recycle that money and loan it 65 times.


It is the addiction to debt that is going to destroy this country in a slow death, if we don't change our ways as a society. Debt especially as a long term policy simply does not work. This economy is actually running on deficit spending. When the cost of goods and service go up, the terms of the loans are getting longer. It use to be you could only finance a car for five years. Now you can find loans for a car from 7 to 10 years. A home use to be 20 years and now can be financed over 40



Not to mention the people that are being scammed to refinance their homes for a lower interest rate.
Why is it a scam? Well because the interest is paid in front of the mortgage. So you pay all you interest up front and when you refinance you haven't paid off much of the principle yet. So you wind up borrowing the same money again. Plus, the banks charge you points and closing cost to boot.

I see a high inflationary period coming down the road. With all these bailouts designed to keep the economy running the way it is rather than fix it, you and I should be cautious. How? By simply refusing to play the debt roller coaster game. Refuse to get into unnecessary debt.

The rich ruleth over the poor; And the borrower is servant to the lender. (proverbs 22:7).
That is how the rich are getting richer and the middle class is diminished. If we want to have control of our life we need to hold onto more of our wealth. Borrowing money is not the way to a care free life. It is in effect the way to servitude, not freedom.