The failure of Silicon Valley Bank (16th largest bank in US) last Friday resulted from depositors withdrawing their funds in response to a drop in value of the bank’s bond portfolios caused by the Federal Reserve’s ill-considered hikes in interest rates. The mindless policy implemented by the Federal Reserve cures inflation by producing bank runs, failed banks, and unemployment. The Federal Reserve and neoliberal economists are still stuck in the worn out thinking of 20th century Keynesianism.
Yesterday federal regulators seized New York’s Signature Bank which was overwhelmed by deposit withdrawals. The banks’ failures, with troubles reported afflicting Republic Bank (14th largest in the US) and reports that many Wells Fargo depositors experienced zero balances due to a glitch of the digital revolution has left those fortunate enough to have bank balances an entire weekend to work themselves into a panic about the safety of their own bank deposits. The question is whether panicked depositors rush to withdraw their money today (Monday, March 13, 2023). Hoping to avoid this, the Federal Reserve announced yesterday on Sunday that it would provide banks with cash to meet withdrawals. The Federal reserve announced that all depositors in Silicon Valley and Signature banks, including those with deposits above the insured amount, would be protected.