The Dow Jones Industrial Average opened sharply lower Monday after U.S. Treasury Secretary Steven Mnuchin shocked investors worldwide over the weekend by tweeting that he had spoken to the CEOs of the six largest U.S. banks to ensure they were liquid.
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The Dow opened 338 points, or 1.5 percent, lower at 22,112 in the first 20 minutes of trade. The losses added to last week’s crushing performance, the index’s worst week in 10 years — during the 2008 financial crisis.
Over the weekend, Mnuchin tweeted that he called the CEOs of J.P. Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo and Citigroup.
The executives assured him that “they have ample liquidity available for lending to consumer, business markets, and all other market operations,” Mnuchin wrote.
“They have not experienced any clearance or margin issues and that the markets continue to function properly,” he added.
Today I convened individual calls with the CEOs of the nation’s six largest banks. See attached statement. pic.twitter.com/YzuSamMyeT
— Steven Mnuchin (@stevenmnuchin1) December 23, 2018
Mnuchin’s comments seem to have been meant to assuage investors, economists and traders that there would not be a run on banks, which precipitated the last crisis.
However, the message may have had the opposite effect since it was not a concern of market watchers until his tweet.
“If this weren’t the end of December, I would have thought it was April Fools,” Jared Bernstein, former chief economist to Vice President Joe Biden, told The Washington Post. “The markets are already nervous enough. It’s like sending out a message saying our space shields can intercept incoming asteroids. Uh, I didn’t know there were any coming our way.”
‘When I saw he was calling the banks, that just tells me the administration is a little unsure of what’s going on.’
“A run on the banks is when people are afraid money won’t be liquid, so they start withdrawing money, like Lehman Brothers, so they had to go to the Fed for extra cash, which is essentially a bailout,” U.S. Global Investors head trader Michael Matousek told ABC News.
“There’s a difference between now and then because we didn’t have stress testing like we do now,” he added. “We have so much stress testing, they’re so regulated, when I saw he was calling the banks, that just tells me the administration is a little unsure of what’s going on.”
The New York Stock Exchange (NYSE) closes early on Monday at 1 p.m. ET. It is closed on Tuesday for Christmas.