“The Big Short” investor Michael Bury said extraordinary action by regulators to backstop regional banks should be enough to resolve the current crisis and stabilize financial markets. “In October 1907, the Knickerbocker Trust failed because of risky bets, leading to panic. Two others soon failed, and it spread. When a run began on a healthy trust, J.P. Morgan made a stand 3 weeks later the panic resolved and the market went down,” Buri said in tweets on Wednesday. “A stand was made last weekend.” More than a century earlier, there had been a financial crisis known as the “Panic of 1907”, where there were several runs on banks, including the Knickerbocker Trust. The crisis ended in just three weeks after JPMorgan, the bank’s founder, pooled money with other financiers to bail out the banking system. The founder of Scion Asset Management believes that history should repeat itself given the urgency and magnitude of rescue measures from regulators. On Sunday evening, two days after the Silicon Valley bank was seized, the government announced that all depositors involved would get their money back and that it would provide additional funding facilities for troubled banks. Barry, best known for calling out the subprime mortgage crisis, said Monday evening that he hoped the banking mess would end soon without any serious damage. “This crisis can be resolved very quickly. I don’t see a real threat here,” Barry said in a now-deleted tweet. Barry shot to fame before the 2008 crisis by betting against mortgage-backed securities. Barrie was featured in the book “The Big Short” by Michael Lewis and later in the Oscar-winning film of the same name. Investors weren’t quite sure the turmoil was over on Wednesday. The selloff deepened on Wall Street as concerns spread beyond regional banks. Shares of Credit Suisse, a Swiss bank with large US and global operations, fell more than 20% to their lowest level ever.
Orignal Post From: Michael Bury compares government’s bank rescue to JP Morgan’s stand that averted the Panic of 1907