Elon Musk does not appreciate the work that Federal Reserve Chairman Jerome Powell is doing. When the Fed base interest rate increase by a quarter of a point on Wednesday, it called the banking system “sane and resilient.” But Tesla The CEO disagrees.
“Umm…the banks are melting,” Musk tweeted early Thursday.
Silicon Valley Bank fall on March 11, followed by signature bank day after that. Another regional bank, First Republic, saw its shares almost 90% off this month though unusual rescue involving nearly a dozen major financial institutions in an attempt to stem the financial contagion. The failure of the Swiss bank Credit Suisse in Europe, which UBS take over this weekend for more than $3 billion, added to the discomfort.
The banking crisis contributed to dramatic volatility in the Treasury market. This month, the ICE BofA MOVE index, a widely watched bond market volatility gauge, reached the highest level since the 2008 financial crisis, when banking turmoil reduced market liquidity.
Tired of interest rate hikes
Musk also Written on Wednesday: “A major driver of depositors fleeing is people moving money from low-interest savings accounts to high-yield money market (Treasury Bill) accounts. This stupid rate hike will exacerbate the flight of depositors.”
When a Twitter user propose that Powell should be replaced with GPT-4—recent release successor to the popular AI chatbot ChatGPT—Musk answered“Couldn’t have been worse!”
Musk isn’t the only one to criticize the Fed’s latest rate hike.
Mark Zandi, chief economist at Moody’s Analytics, called “unnecessary” wandering on Wednesday night. “The Fed’s decision to raise rates again amid the fragile stability in the banking system is disappointing,” he said. tweeted. “Now they run the risk of raising rates too high and too quickly.”
Powell admits that rate hikes contributed to the bank’s collapse at a press conference on Wednesday, said, “Events in the banking system over the past two weeks could lead to tighter credit conditions for households and businesses, which in turn will affect results.” economy.”
But not everyone thinks Powell has gone in the wrong direction or sees the bank’s failure as a sign of deeper problems.
Citigroup CEO Jane Fraser called a “reasonable” hike in an interview with David Rubinstein, head of private equity firm Carlyle. She added, “This is not a credit crisis. This is a situation where a couple of banks have some issues, and it’s better to make sure that we deal with that in the bud.”
Musk urged the Fed on Monday to not only pause rate hikes, but reverse them, tweets,
“The Fed needs to cut rates by at least 50 basis points on Wednesday.”
That came in response to Bill Ackman, founder of Pershing Square Capital Management, who argued that the Fed “should pause” rate hikes due to the banking turmoil, tweets“This is not an environment where the Federal Reserve should raise interest rates and put more pressure on the system because financial stability is the Fed’s primary responsibility.”
Musk’s frustration with Fed rate hikes is back. In December, he blamed the central bank for the massive drop in Tesla shares — the automaker’s stock last year 65% off and it lost $700 billion in market valuation – arguing that rising interest rates have made the stock market less attractive to investors.
“As the actual ‘risk-free’ rate of return from Treasury bills approaches the much riskier rate of return from stocks, the value of the stock falls,” he said. tweeted at that time. “For example, if Treasury bills and stocks both have a 10% rate of return, people will just buy the old one.”
He more, “We do not control the Federal Reserve. That is the real problem here.”
This story was originally featured on Fortune.com
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