Silicon Valley Bank Collapse: The failure of 2 banks raises concerns among customers of banks of similar size, including First Republic Bank
LOS ANGELES– President Biden has said the US banking system remains safe after the collapse of two US banks, but the bankruptcies have nonetheless raised concerns among customers who hold their money in other banks of similar size.
At First Republic Bank in Studio City, Los Angeles, on Monday morning there was a steady stream of customers withdrawing their money and transferring it to larger banks. It came amid concerns over what could be next to rock in the wake of the second and third biggest bank failures in US history.
U.S. regulators shuttered Silicon Valley Bank on Friday after experiencing a traditional bank run, where depositors rushed to withdraw their funds all at once. It is the second largest bank failure in US history, second only to the 2008 failure of Washington Mutual.
In a sign of how quickly the financial hemorrhage was happening, regulators announced that New York-based Signature Bank had also failed.
Silicon Valley Bank had over $200 billion in assets and catered to tech start-ups, venture capitalists, and high-paying tech workers. Officials assured all bank customers that they would be able to access their money on Monday.
President Biden said on Monday he would seek to hold those accountable and pushed for better oversight and regulation of big banks. And he promised that no loss would be borne by the taxpayers.
“Americans can be sure that the banking system is safe,” the president said. “Your deposits will be there when you need them. Small businesses across the country…can breathe easier knowing they’ll be able to pay their employees and pay their bills.
The greatest pressure is on regional banks a few steps below the size of the massive “too big to fail” banks that contributed to the downfall of the economy in 2007 and 2008. First Republic plunged 62.6% even after the bank said on Sunday it had bolstered its finances with cash from the Federal Reserve and JPMorgan Chase.
Amid the turmoil, First Republic, in response to Eyewitness News, tried to reassure nervous customers.
“We continue to fully meet the needs of our customers by opening accounts, disbursing loans, executing transactions and providing exceptional service in our offices and online,” First Republic said in a statement.
But for people who show up at First Republic branches today to withdraw their money, the bank cannot be trusted.
“I still don’t trust this,” said Patti, a longtime First Republic bank client in Studio City. “I’m sorry to have to say that. You understand, my feelings on this. It’s not easy going through these things and losing the money you’ve worked for for so many years.”
Other customers said they were withdrawing funds to avoid being last in line in case there was a run on First Republic Bank, causing a shutdown similar to what happened in Silicon Valley Bank last week.
Big banks, which were repeatedly stress-tested by regulators after the 2008 financial crisis, weren’t down as much. JPMorgan Chase fell 1.2% and Bank of America 3.9%.
First Republic Bank is small compared to the largest banks in the country.
Still, a financial expert told Eyewitness News that this problem could be isolated and would not spread to big banks.
“The broader market is rallying today, and that’s why I think it doesn’t necessarily turn into a more systematic failure for all stocks and all stocks,” said Sahak Manuelian, managing director of Wedbush. Securities.
How does a bank collapse in 48 hours? A timeline of the fall of Silicon Valley Bank
Treasury Secretary Janet Yellen claimed regulators’ actions after bank failures did not constitute a bailout. She also disputed comparisons to the 2008 financial crisis.
With the US banking system in turmoil, Brian Gilder, a Los Angeles-based certified financial planner, says worried customers should spread their savings across multiple bank accounts.
“Don’t panic and understand what’s FDIC insured and what’s not,” Gilder said. “Let’s say for example that you have $350,000 in bank A. I would have $250,000 in bank A, and then I would consider possibly going to bank B and putting $100,000 there, so that you can sleep at night knowing that all you have is FDIC.”
The Associated Press contributed to this report.