After Silicon Valley Bank collapsed, shaking world markets, Nobel economics prize winner Joseph Stiglitz says US authorities "did the right thing" by providing federal money to protect deposits. But the economist also says the financial system needs a rethink to properly bring it into the digital era.
Stiglitz is honest but not reasssuring. Asked by French news agency AFP if the Silicon Valley Bank collapse last week is the first tremor of a major financial crisis, he says he doesn't know. And neither does anyone else.
"That's one of the things that one can't tell," says Stiglitz, who shared the Nobel Prize in 2001 for research on the ways in which information affects market choices.
"The banks are sounder than they were before, in 2008. There has been progress, not as much as there should be."
Stiglitz says the problem is inertia. He points out that it used to be slow and difficult to take money out of one bank or investment portfolio, and move it to another.
"But if everybody has internet banking, it's much easier to take your money out and put it somewhere else. The question about the stability of the financial system has to be rethought, recognising the new technologies.
"And I'm not sure that it has been done," Stiglitz continues. "Before the SVB collapse, there had been very little discussion about how technology has changed the probability of bank runs."
Now, people are talking about very little else.
And why don't we foresee the collapse of banks like SVB?
"The banking system is very complex. There are always rumours about particular banks who have vulnerabilities, and unless you know their balance sheets, their exposures and their performance in stress tests, you can't really know," says Stiglitz.
"What was interesting about SVB was that there were no negative discussions about its lending portfolio. This is not a lending problem, it's a maturity mismatch and that can happen anywhere in our economic system."
A maturity mismatch is a polite way of saying a bank does not have enough cash to pay its debts. Bankruptcy is the less polite form of the same problem.
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As for Washington's decision to send in the cavalry, Stiglitz says the US authorities finally did the right thing, but they reacted slowly.
"It would have been a lot better if they had acted more quickly" to assure that depositors with more than $250,000 were not going to lose their money, he argues.
"If they hadn't done that, there was a possibility of a massive financial crisis."
And that possibility remains afterall. On the day Stiglitz was talking to AFP, global stock markets were losing ground on renewed fears of a burgeoning banking crisis, snapping a one-day rally as Swiss bank Crédit Suisse led a rout in shares of major lenders.
After Tuesday's rebound, equities fell again on Wednesday, with European indices falling more than 3 percent in the afternoon and Wall Street opening lower.