Fun New Wednesdays

Hello, and welcome to Wednesday, where once again we’re awaiting an announcement from the Fed about interest rates. Of course, a couple of banks have collapsed since its last meeting, so things could look very different this time around…or not!

Imporant SVB reads

also from the Morning Brew

Contextualizing the finance news you need to know.

Is your bank running? Well, then you better go catch it. 

Ahem. We’re sorry. That joke was a trauma response. If you’ve been hiding in a cave for the last five days, allow us to fill you in: Silicon Valley Bank (SVB) collapsed on Friday, marking the second-largest bank failure in US history. The third-largest failure occurred just two days later, when regulators pulled the plug on Signature Bank. After that crazy weekend, which was messier than spring break at Señor Frog’s, regional bank stocks plunged more than 12%. And while regional banks have started to rally following Tuesday’s inflation report, it makes total sense to wonder: What should you, the everyday banking customer, do if your bank fails?

Step 1: Know your balance

The Federal Deposit Insurance Corporation (FDIC) announced that all SVB depositors will get their money back, regardless of the deposit amount. (To Signature Bank customers, the agency also promised that “all depositors of the institution will be made whole.”) That came as a surprise to some because the FDIC historically only insures $250,000 in individual bank deposits. In sum: Keep an eye on exactly how much money you have in the bank.

Step 2: Get your money

There are generally two possibilities when a bank is seized by regulators:

  • The FDIC sells the failed bank to a “healthy” bank. The healthy bank then immediately takes over management of the funds. If that happens, you’ll have access to your money with no issues; if all goes well, it’ll seem like nothing happened and you can continue banking as usual, just with new bank management.
  • The FDIC pays out all insured deposits. If the FDIC can’t wrangle a healthy bank, the agency will send you a check for your entire insured balance. Per the agency website, the FDIC works to send those checks “within two business days of the failure of the insured institution.” Seems like a good reminder to make sure your address is up-to-date.

Bottom line: Whatever you do, please don’t withdraw your $$$ and bury it in your backyard. Gold bars are so 1930s.—Lillian

SVB and how to check if your bank deposits will make it?

from the Morning Brew

After Silicon Valley Bank rained volcanic hellfire upon the startup industry, some folks wanted to know: What do I do if my bank fails? Well, what if we told you there’s a way to keep an eye on your bank’s business practices that may make it easier to predict SVB-style mayhem? It all comes down to your bank’s balance sheet. But what’s a balance sheet, and why does it matter to the everyday bank customer?

Balance sheets are essentially financial statements.They cover a gaggle of capital ratios that can give shareholders an idea of a company’s financial health. For example, the asset-to-liability ratio—also known as the quick ratio—helps determine a bank’s solvency or its ability to repay your deposits.

So, where do you find these mystical troves of data? The FDIC has the info for all FDIC-insured banks (WSJ also keeps a log). For example, here’s US Bank. As you can see, in 2022, the bank’s net loans—$381,277—were less than the net deposits of $524,976. That’s a mark of good liquidity. And, in banking, liquidity is a good thing. Unless the liquid in question is, ahem, hellfire pouring from the sky. (Sorry, SVB.)—Lillian