Yes and now think about the implication of all the SMBs flowing their cash out of their regional banks all at once. And if you have anything more than a few employees, you definitely have an account over $250k because that's still an incredibly small business.
I understand you have a fear of contagion risk, but I don't see many signs of it. I think this mainly happened because SVB had a depositor base where a big chunk was tightly knit and prone to herd-like behavior. Most companies just aren't a) in the red, b) letting millions in cash sit around, and c) lacking in treasuring management capacity.
But if there are a ton of regional banks who took advantage of laxer regulation and had balance sheets in as poor a shape as SVB, then I am fine with some of them failing too. It won't be anywhere near the problem that 2008 or the S&L crisis was, and we'll end up with tighter regulation for those banks next time around.
You don’t see any risk of contagion? We have a fractional reserve banking system. If even a small percentage of depositors try to withdraw all at once, that can bring down any bank.
Right now, everyone in the country with uninsured accounts is being incentivized to pull those deposits and pull them fast. We don’t know how things will turn out, but there is obviously a major risk of contagion.
As with the other person, I understand that's a thing you're imagining. I'm just not seeing much evidence for it. It is a possibility? Sure. But not one I see as a major risk. And from what financial regulators are saying, I don't think they see it that way either.
You're not seeing it because banks are generally closed over the weekend. This is like sitting in the eye of the hurricane and saying that everything is fine because it's not windy yet.
For the third time, I understand people have this belief. But restating a belief without adding evidence doesn't convince me you're right. If anything, it's the opposite.
We could be in the eye of a hurricane. Or we could be in any of the non-hurricane locations on the planet. I think the latter is more likely.
Now that we know a second bank is being taken over, yes, a verdict is in. But I think that says more about having a second failure than the situation we were discussing.
There's a serious risk of contagion here.