In an appearance at The Wall Street Journal’s Tomorrow of Everything Conference in May, Wells Fargo CEO Charlie Scharf stated there is “no doubt” the United States is headed toward an economic depression.
We Can’t Stop It
“It’s going to be difficult to prevent some form of catastrophe,” said Scharf, who was present when Fed Chairman Jerome Powell spoke.
“We exist in this bizarre environment where there’s still this underpinning power in respect of what we see, but we know that it’s going to degrade,” Scharf added.
The GDP of the United States dropped by 1.4 percent in the fourth half, the worst figure since the pandemic began in spring 2020.
The federal bank’s recent policies have sparked fears of a possible recession, which some traders believe might occur if interest rates are hiked too soon.
“The Feds are saying the economy is burning too hot and that we need to moderate growth in the economy,” Scharf explained.
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“You can see the market responding to it. That instability is going to have to continue. Costs are going to go up. This will disrupt the dynamic of retail and business health and energy.”
The Federal Reserve last raised the rates on May 4, a decision that former Fed Chairman Ben Bernanke argued was too delayed in reflection.
To calm the business and limit surging inflation, prices have been lifted twice this year by a maximum of 75 percentage points, with five more increases projected in 2022.
The rate increases have already boosted lending prices for Americans across the board, including homes, credit cards, and other borrowing.
Businesses and consumers, on the other hand, are doing well economically, according to Scharf.
The industry continues to thrive post-pandemic, while supply problems alleviate, buffering the sector during a future downturn.
It Might Not Be So Bad
“The reality everyone is so robust heading into it should ideally give a buffer,” he said, “because whatever downturn there is, if there even is one, it will be brief and not too deep.”
“What we believe is the business and consumer momentum we observe will be sufficient to weather the recession.”
Wells Fargo CEO warns 'no question' the worst is yet to come for US economy https://t.co/5srCgQdWc2
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Concerns that the Fed’s tighter stance will stifle growth in the economy have sent major bank stocks like Wells Fargo lower. Wells Fargo’s stock has been down 10% since the start of the year.
In the meantime, Warren Buffett’s Berkshire divulged on May 16 that it sold its remaining shares in Wells Fargo during the first quarter, per its most recent filing of holdings with the Securities & Exchange Commission.
However, the bank’s share price rallied the next day, along with other bank shares.
Since 2019, several Berkshire shareholders have been urging Buffett to sell all of his company’s Wells Fargo assets, following a series of scandals that tarnished the bank’s reputation among investors.