Michael Burry Compares Current Banking Turmoil to Panic of 1907 — Highlights Markets Bottoming

Michael Berry, a hedge fund manager known for his predictions of the 2008 financial crisis, drew parallels between the current banking turmoil and the Panic of 1907. He noted that three weeks after JP Morgan spoke, the panic stopped and the markets bottomed out. “A booth was made last weekend,” noted a well-known investor.

Michael Berry on Bank Failures, Panic of 1907, Crashing Markets

Renowned investor and founder of investment firm Scion Asset Management Michael Berry compared the current financial turmoil following the collapse of several banks to the Panic of 1907. Berry is best known as the first investor to foresee and profit from the US. the subprime mortgage crisis that occurred between 2007 and 2010. He is featured in The Big Short, Michael Lewis’s book about the mortgage crisis, which was made into a film starring Christian Bale.

The “big short” investor tweeted on Wednesday:

In October 1907, the Knickerbocker Trust collapsed on risky bets, causing panic. The other two soon failed, and it spread. When the healthy trust fund started running, JP Morgan opposed it. After 3 weeks, the panic subsided and the markets bottomed out. The stand was made last weekend.

The Knickerbocker Trust Company was one of the largest trust companies in the United States. Its collapse in October 1907 caused a financial panic and led to a loss of confidence in the entire banking system.

The panic came to an end after JP Morgan orchestrated the bailout of several major banks and convinced other financiers to do the same. The bailout helped restore confidence in the banking system. Subsequently, on December 23, 1913, the Federal Reserve System was created.

Berry’s tweet came after the failure of several major banks in the US, including Silicon Valley Bank and Signature Bank. The first was shut down by regulators last Friday, and the second by the New York State Department of Financial Services a couple of days later.

To stop the run on banks and restore confidence in the banking system, the Treasury Department, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) have announced measures to allow depositors of both banks “to have access to all their money.” Moreover, the Federal Reserve Board said it would “provide additional funding to eligible depository institutions to help banks meet the needs of all their depositors.”

While some people on social media agreed with Berry, some pointed out that the Federal Reserve did not exist in 1907, so the current situation is different.

In another tweet, Berry wrote: “This crisis could be resolved very quickly. I don’t see any real danger here.” As for the US economy, Berry has previously warned of another surge in inflation and a prolonged multi-year recession in the US.

What do you think of Michael Berry’s comparison between the Panic of 1907 and the current banking turmoil? Let us know in the comments below.