Monday, depositors withdrew cash and investors sold off bank stocks as the federal government scrambled to reassure Americans that the banking system was secure in the wake of two bank collapses that stoked worries that further financial institutions may fail.
President Joseph Biden asserted that the system was secure after the second- and third-largest bank collapses in U.S. history occurred within 48 hours of one another. As a response to the crisis, officials insured all deposits at the two banks and devised a mechanism to protect other banks against a run on deposits.
“Your deposits will be available when you need them,” Biden reassured the audience in an effort to exude composure. In addition, he stated that the bank officials culpable for the failures will be held accountable.
In other news, the Federal Reserve said that it will reevaluate Silicon Valley Bank’s oversight.
Michael Barr, the Fed’s vice chair for supervision and leader of the initiative, stated, “We must have humility and conduct a deep and complete examination of how we supervised and regulated this business, as well as what we can learn from this experience.”
Authorities shuttered the bank Friday after depositors tried to withdraw their cash all at once. In the history of U.S. banking, only the 2008 collapse of Washington Mutual was greater. Sunday night, regulators in New York seized Signature Bank, the third-largest bank failure in the United States.
In both instances, the government agreed to reimburse deposits that exceeded the $250,000 federally insured maximum.
Notwithstanding the warning from the White House, investors sold bank stocks en masse. Despite the bank’s announcement that it would get emergency capital from the Federal Reserve and additional funding from JPMorgan Chase, First Republic Bank’s stock price declined by more than 60 percent at the market closing.
KeyCorp and Comerica shares fell by roughly a third. The shares of well-known businesses such Charles Schwab, Fifth Third Bank, Truist, and Huntington Bancshares fell by double digits.
