The Second Largest Bank Failure in American History
3 Days ago, the SVB collapsed, losing nearly $20 billion. So what happens next?
Last Friday, Mar. 10th, 2023, we witnessed the second-largest bank failure in American history. In California, this Silicon Valley Bank was hit hard because of increasing interest rates being one reason. The bank watched many of its customers get scared and try to withdraw their money, causing a run on the bank, so the federal government, through the FDIC, stepped in and closed the bank.
Here’s the problem, typically, your deposits in a bank are only protected up to $250,000, but the vast majority of customers at this bank had deposited more than that as this bank specialized in start-ups and small businesses. The uncertainty about what would happen to customers with more than $250,000 deposits started spreading to other banks. A New York bank also failed Sunday night, and others have begun flashing red, causing reason for worry.
Next, people started transferring their money into bigger banks, and we were in the early stages of a domino effect. In an attempt to stop the domino effect, Joe Biden made the statement live that the people will be protected along with the depositors’ who are mainly businesses that otherwise would have to close and lay off thousands of people.
Watch Biden deliver remarks on the collapse of two banks in 3 days and his live message here:
Source: ABC News YouTube
A huge political debate will likely ensue about bank regulation and how much risk we’re willing to let them take going forward. He stated that “no losses will be absorbed by the taxpayers,” and the U.S. is not protecting the management or the people who own stock in the bank right now. Biden went on to say that has one purpose of making sure this crisis ends now in hopes that it was caught early enough so that taxpayers won’t have to pay and pass the bill on to the banks.
Biden’s goal here seemed to be to reassure taxpayers that depositors’ money is safe, but how do you feel about the bank collapse? Do you still trust the large bank institutions after this unravelling? Tweet us your thoughts @WealthyVC and we’ll share you.
If you want urgent market updates, don’t forget to sign up for our newsletter below!
Disclaimer: Wealthy VC does not hold a position in any of the stocks mentioned in this article.