Financialised valuation dynamics and power of finance: The 2023 U.S. banking crisis

In this paper, we develop a theoretical framework called ‘financialised valuation dynamics’, situated within debates on the power of finance, drawing on the conceptual and empirical contributions of early financialisation studies on firm competition in stock markets and the conjunctural nature of valuations. We analyse the 2023 U.S. banking crisis using our theoretical framework to demonstrate that the regulators’ ex-post explanation of the crisis as interest rate risk mismanagement and the concentration of uninsured deposits at the three failed banks ignores fundamental sources of financial instability that central banks have contributed to through monetary policy. We argue, through empirical analysis, that financialised valuation dynamics exercise taxonomic power and narrativise the business models of the three failed banks, which had led them to outperform other U.S. banks in stock market valuation before their failure. Financialised valuation dynamics depicted the three failed banks as ‘niche’ banks serving disruptive technology firms, which were conjuncturally regarded as the future growth engines of capitalism following the COVID-19 pandemic.