A series of banking crises this month headlined by the failure of Silicon Valley Bank has forced analysts from multiple banks, including JPMorgan Chase, to rewrite their recession forecasts from scratch, as months of small victories against inflation and a relatively strong economy were potentially swept away in under two weeks.
Even if the government and the private sector are able to successfully contain contagion from the bank collapses spreading through the economy, the failures may still lead to lasting damage for the U.S. financial system. Some banks are teetering on the edge in Europe and the U.S., while jittery markets and the promise of stricter regulation could lead to a credit crunch—a steep decline in banks’ willingness to lend caused by a lack of funds.
