USA finance

Financial planner talks about the safety of U.S. banking system after Silicon Valley Bank failure

RICHMOND, Va. — Last week’s collapse of Silicon Valley Bank and its subsequent takeover by federal regulators sent tremors through US markets.

Signature Bank, another small bank, failed as well.

To keep depositors from making a destructive run on the banks, the FDIC said it would make them whole, that is, cover all their money beyond the $250,000 limit.

Financial markets rebounded somewhat Tuesday, but is the danger behind us?

Financial Planner Jamie Cox with the Harris Financial Group spoke with CBS 6 about the US banking system and the safety of consumers’ money.

Cox pointed out that most of us don’t have to worry about a bank or the federal government not being able to redeem 100% of our deposits.

“Everybody knows the FDIC will cover each account up to $250,000,” said Cox. “The big Silicon Valley investors who put $30,000,000 in one checking account should know better. Shame on them.”

Cox pointed out that the rapid rise in the overnight lending rate over the last year to stem inflation has put enormous pressure on smaller banks because the longer-term assets they buy, lose value in that environment, meaning actual losses if they have to sell to cover withdrawals.

“I think the Federal Reserve will have to limit its next rate increase,” Cox said. “These smaller institutions can’t keep up otherwise.”

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