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The stunning collapse of two failing banks in the span of three days has many Americans wondering: Is my money safe?
The government takeovers of Silicon Valley Bank (SVB) on Friday and Signature Bank on Sunday sent shockwaves across the banking system and financial markets—not least because both were respected banks that unraveled so quickly.
But the short answer for the vast majority of Americans with bank accounts is that your money is safe and insured. Additionally, the U.S. government and the Federal Reserve acted quickly to rescue bank customers whose deposits were above the insured amount. They also enacted new measures to assist banks that need help stumping up the cash to give customers their money back.
There are still outstanding questions about the health of other midsize banks and whether the problems at SVB and Signature will lead to other bank failures. Major U.S. banks lost around $90 billion in stock market value on Monday, bringing their losses over the past three trading sessions to nearly $190 billion.
“The problem is that people start inferring that something’s wrong with other banks,” says Anat Admati, professor of finance and economics at Stanford University. “They lose confidence in the system. It’s a domino effect.”
There are some signs that the banking system could be facing larger, systemic issues—though nothing compared to the global financial crisis of 2008. At the end of 2022, U.S. banks were sitting on $620 billion in unrealized losses. That is, they are holding assets that had decreased in value—mostly due to rising interest rates. That figure is up from just $8 billion one year earlier. The significant unrealized losses, announced by the Federal Deposit Insurance Corporation last week, paint the picture of a banking system that is coming to grips with new risks posed by the…
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