LAS VEGAS (KTNV) — A recent collapse of Silicon Valley Bank continues to headline the financial industry, and now, many are wondering what this means for their bank after the recent failures.
A Las Vegas financial analyst spoke to KTNV. Steve Budin explains what happened with the SVB bank.
"Real simply, what happened was many of their customers wanted to withdraw their funds," Budin said. "All at the same time. Contrary to what a lot of people think, your local bank does not have all of their deposits in the basement in the safe, they buy treasury bonds."
"When the bank runs happened, the bank has to start selling assets that they own, and those assets were down in value and they were trying to raise more money. They were not able to do it, and then the bank failed," he said
Now, the Federal Deposit Insurance Corporation is in control of all of this. We have seen the Federal Reserve raise interest rates all last year into 2023. KTNV's Rachel Moore asked Budin how this is different than the Washington Mutual collapse in 2008.
"Hundreds of banks failed," Moore said. "That's what prompted us to go into a recession."
"In Washington Mutual, that was an issue of 'they made bad investments'," Budin said. "They were making bad loans to people who could not pay the money back."
Budin said it was not a question of timing, it was a question of quality.
"So, they couldn't even sell those investments that they have," Budin said. "It was bad."
The bank that failed last weekend was really just short of time according to Budin. The investments they made were not secure U.S. treasury bonds, but with the Federal Reserve raising interest rates too fast, bond values went down really quickly.
Budin says that is why the FDIC and the Federal Reserve came in to stabilize the bank.
"It was just a question of bad timing," he said.
In the conversation, Moore brings up the possibility of a recession brewing.
"This could lead to a panic withdrawal," Moore said. "Do we have anything to worry about with our own banks?"
Budin answers saying he does not think so.
"The current law states if you have less than $250,000 in the bank, the FDIC does cover those holes," he said. "Anybody who has more than that, if you feel the need to feel comfortable, then yes talk to your bank, there's nothing wrong with asking some questions."
Budin says to find out what the bank's investments are, or just move your money to another bank to keep it under the $250k limit. Nevertheless, Budin says he has his money residing in a local bank, and he's not worried about it.
