Why the US Banking Crisis is Far From Over: Expect More Bankruptcies and Recession, Warns Billionaire Stanley Druckenmiller

Investing.com – While the banking crisis seems already forgotten by investors, several big names have warned that the US banking sector could soon find itself in trouble again, and that new bank failures are to be expected.

This is particularly the case of billionaire Stanley Druckenmiller, who fears a recession after more than a year of aggressive increases in interest rates by the Fed, without concrete results on inflation.

The well-known investor said on Wednesday that despite the recent resilience of the US economy, which posted low unemployment and positive first-quarter GDP growth, a “hard landing” is inevitable.

“Our main argument is that there is still a lot to do, especially – in addition to asset markets – economically,” he told Bloomberg on Wednesday.

Druckenmiller explained that high interest rates could lead to further problems in key sectors of the economy, as was the case for regional banks in March, when Silicon Valley Bank failed, forcing regulators to to intervene.

He indicated that the struggling commercial real estate market, and in particular the office sector is one of the sectors likely to experience difficulties. But he also warned that a “credit crunch” could be on the way, with banks risk-averse amid slowing economic growth.

“There’s a lot under the hood when you go from such an environment, the biggest asset bubble ever, to interest rates rising 500 basis points in a year, I think. Silicon Valley Bank, Bed Bath & Beyond (OTC:), is likely to be the tip of the iceberg,” he said.

“I don’t know when, but certainly by the end of the year 23” he also declared with regard to the probable entry into recession in the United States, which forecast echoes those of Wells Fargo (NYSE:) et al Deutsche Bank (ETR:).

Finally, it should be noted that Dawn Fitzpatrick, Chief Investment Officer of Soros Fund Management, also warned yesterday against the risk of other bankruptcies in the United States, expecting in particular that other American banks go bankrupt, stressing that small lenders are particularly vulnerable