Speaker 1: From Bloomberg News and iHeartRadio. It's the big take. I'm
Speaker 1: west COASOVA today. Is the money in your bank account
Speaker 1: still safe? Once again? The US government is rushing to
Speaker 1: contain the damage after a bank failed from poor management
Speaker 1: and loosened laws, and that fallout from the collapse of
Speaker 1: Silicon Valley Bank will continue for weeks and probably months.
Speaker 1: The Biden administration is assuring tech startups and other companies
Speaker 1: that the billions they had in the bank will be
Speaker 1: paid out and they won't lose their money. But who's
Speaker 1: going to foot the bill? And how will all of
Speaker 1: this financial turmoil potentially affect your savings and money you
Speaker 1: may have invested. Colleagues Ben Bane, who leads Bloomberg's coverage
Speaker 1: of how Washington regulates Wall Street, and personal finance reporters
Speaker 1: Suzanne Woolley are here with answers. Susanne, there's a lot
Speaker 1: of coverage over the Silicon Valley Bank now and how
Speaker 1: it's going to affect business in the economy. But I
Speaker 1: think a lot of people, and I am one of them,
Speaker 1: are thinking a little closer to home. So let me
Speaker 1: ask you, just off the top, how concerned should people
Speaker 1: be about the money we have in the bank. The
Speaker 1: reassuring answer is that most people really don't have that
Speaker 1: much to be concerned about, for the simple fact that
Speaker 1: most of us don't have over two hundred and fifty
Speaker 1: thousand dollars with a single bank. So any deposits we
Speaker 1: have are covered by the Federal Deposit Insurance Corporation the FDIC,
Speaker 1: and each account is covered up to two hundred and
Speaker 1: fifty thousand, and actually you can be covered for more
Speaker 1: at the same bank because that two hundred and fifty
Speaker 1: thousand applies to different cagories of ownership. So say you know,
Speaker 1: I have an account savings account that's two hundred fifty
Speaker 1: k that's covered. My husband has one that's covered up
Speaker 1: to two hundred fifty k. If we have a joint account,
Speaker 1: each of us counts for that two hundred and fifty
Speaker 1: thousand dollars, so that's another five hundred thousand dollars in coverage.
Speaker 1: So that gets you to a million in coverage pretty easily.
Speaker 1: And there are actually some other types of accounts that
Speaker 1: you can open, like trusts, that will sort of stretch
Speaker 1: that FDIC insurance even further. So as long as you
Speaker 1: don't have more than two hundred and fifty thousand dollars
Speaker 1: in an individual account or five hundred thousand in a
Speaker 1: joint account, which, as you say, most people don't, then
Speaker 1: you're pretty much covered in case something bad happens to
Speaker 1: the bank. So the really extraordinary thing we saw happen
Speaker 1: just two days after Silicon Valley Bank failed was that
Speaker 1: the federal government stepped in and said, not only are
Speaker 1: those insured deposits that we're talking about covered, but these
Speaker 1: uninsured deposits are also going to be covered. People are
Speaker 1: going to be made whole. So it's all of those
Speaker 1: businesses that have money beyond that two hundred and fifty
Speaker 1: thousand dollars sitting in that bank that they can also
Speaker 1: get out there. And it's a big deal because this
Speaker 1: is really what everyone was kind of wondering. This bank
Speaker 1: and some of these other smaller banks that are out there. Businesses,
Speaker 1: industries around the country really depend on them. And what
Speaker 1: the government did is they stepped in here and said,
Speaker 1: it's not just that two hundred and fifty thousand dollars
Speaker 1: or less, but it's the bigger deposits too. So let
Speaker 1: me ask you about that. Because Treasury Secretary Janet Yellen
Speaker 1: came forth to say this, the government is going to
Speaker 1: protect all of these account holders, even if they're above
Speaker 1: the two hundred and fifty. How does that work? Where
Speaker 1: does that money come from? So that's a little bit
Speaker 1: of we're going to wait and see. At the moment,
Speaker 1: we're still kind of getting all the details as this
Speaker 1: schools out. We know that they've said Silicon Valley Bank depositors,
Speaker 1: you can start taking out your money on Monday, which
Speaker 1: is just really the first business day after the bank
Speaker 1: failed on Friday. It's just pretty incredible because you know,
Speaker 1: the fd i C doing this is obvious, such a
Speaker 1: huge step, and it's such a such a big move
Speaker 1: to reassure depositors and savers because as we know, a
Speaker 1: lot of like bank run situations, it's just psychology, it's contagion,
Speaker 1: and so communicating that we're going to be there as
Speaker 1: this sort of backstop and even a bigger way than before,
Speaker 1: you know, it shows how concerned they are about it.
Speaker 1: But it also should give some reassurance. Yeah, and it
Speaker 1: also raises the question, so where does this stop? Right
Speaker 1: we had you had the failure of this bank, and
Speaker 1: then at the same time that the government announced these
Speaker 1: extraordinary measures. They also announced that they were taking over
Speaker 1: another bank, Signature Bank, a bank in New York, and
Speaker 1: they were going to cover those deposits as well. So
Speaker 1: we have these two banks that have failed in the
Speaker 1: span of a couple of days, literally and the government's
Speaker 1: going to step in and make everyone whole. But you
Speaker 1: know what happens now that we're worried about perhaps this
Speaker 1: spreading to other banks, you know, where does it kind
Speaker 1: of end? I mean, that's true. Although people will talk
Speaker 1: about how like Silicon Valley Bank was a bit of
Speaker 1: an outlier, and how they manage their assets and liabilities
Speaker 1: and in there who their clientele was of startups and vcs,
Speaker 1: vcs meaning venture capitalists, And I think if you're looking
Speaker 1: at like a city at JP Morgan A Wells Fargo,
Speaker 1: your concerns are not going to be as great as
Speaker 1: with a smaller regional bank that you've never heard of.
Speaker 1: Let me ask you about that, Suzanne, because these smaller
Speaker 1: regional banks, two of them have already fallen, are now
Speaker 1: under a lot of scrutiny, and there's some questions about
Speaker 1: whether there are other banks that had similar business practices
Speaker 1: that make them vulnerable. So if you have just your
Speaker 1: deposits in one of these regional banks a lot of
Speaker 1: people do. Now, is there a reason to be concerned
Speaker 1: that those banks are going to be a little bit shakier?
Speaker 1: I think everybody should maybe want to do a little
Speaker 1: more research into the bank where their money is in.
Speaker 1: Right now, it's hard to say. With regional banks, we
Speaker 1: don't know what's going to sort of come out of
Speaker 1: the closet here, and it's hard for an individual investor
Speaker 1: to go on to their regional bank site and figure out, like,
Speaker 1: what does my bank's balance sheet look like? But it
Speaker 1: is a good time to sort of understand how the
Speaker 1: FDSC rules work, to do up some reading on your bank.
Speaker 1: If it's a bank that maybe you went into because
Speaker 1: it had the highest interest rate and you don't know
Speaker 1: that much about it, it could very well be fine,
Speaker 1: but just take a look. I mean the point that
Speaker 1: a lot of people are saying to me, and this
Speaker 1: is very obvious, but it's just to not panic. You know.
Speaker 1: Any panicking rarely leads to anything good. So I think
Speaker 1: people should be smart and investigate and sort of take
Speaker 1: some prudent actions, but not freak out about this. And
Speaker 1: another thing to underscores that if we're talking about people,
Speaker 1: the vast majority of people that we're talking about that
Speaker 1: don't have two hundred and fifty thousand dollars in a
Speaker 1: bank account or above that, that was never really in
Speaker 1: play here, right, I mean, that was always covered throughout
Speaker 1: this whole process. So what we were really trying to
Speaker 1: see how much the government was going to step in
Speaker 1: here was about those larger commercial accounts and in the
Speaker 1: effect in the real economy then is those banks, these
Speaker 1: regional banks, play a bigger and bigger will have come
Speaker 1: to play a huge role trillions of dollars in assets
Speaker 1: at this point industries from wineries in California to tech
Speaker 1: startups to you name it across the United States. These
Speaker 1: are the banks that make it work. And what we
Speaker 1: were all kind of waiting to see was what's the
Speaker 1: government going to come out swinging, so to speak and
Speaker 1: do something for all those businesses. And they did. Now
Speaker 1: the question is was it enough to convince everyone that
Speaker 1: all the other banks, you know, don't need to panic,
Speaker 1: and people and businesses don't need to panic, and everyone
Speaker 1: should just kind of take a chill, so to speak,
Speaker 1: and take a beat. Ben President Biden came out on
Speaker 1: Monday with a really forceful speech in which he said,
Speaker 1: US taxpayers are not going to be on the hook
Speaker 1: for any losses. And this is an important point. No
Speaker 1: losses will be born by the taxpayers. I mean to
Speaker 1: repeat that no losses will be born by the taxpayers.
Speaker 1: But how can that be if the bank has collapsed,
Speaker 1: its assets are now in doubt. Who is going to
Speaker 1: pick up the bill? So there's this big deposit insurance fund.
Speaker 1: And what the government did when they came out on
Speaker 1: Sunday and said that they were announcing these extraordinary measures.
Speaker 1: In addition to saying the taxpayers weren't going to be
Speaker 1: on the hook, they said that the support for uninsured
Speaker 1: depositors is effectively going to be recovered from a special
Speaker 1: assessment is what they're calling it, on banks. So essentially
Speaker 1: banks are going to have to kick in more money,
Speaker 1: not just the banks that failed, but other banks as well.
Speaker 1: What we don't know is the details of that how
Speaker 1: that's going to work. But essentially there's going to be
Speaker 1: this special assessment which is going to mean that the
Speaker 1: other banks have to pay more money back into this
Speaker 1: fund and the taxpayers, so to speak, you or me
Speaker 1: or anyone else. President Biden and also the regulators are
Speaker 1: saying are not in the hook directly. It's going to
Speaker 1: come from the industry itself. And does the president have
Speaker 1: the power just to tell banks you have to pay
Speaker 1: a whole bunch of money to shore up a bank
Speaker 1: they failed. As the statute is written, My understanding is
Speaker 1: that when the fund is drawn down, it has to
Speaker 1: be replenished by the industry. So so there's not anything
Speaker 1: extraordinary happening here. It's it's basically how it's supposed to work.
Speaker 1: They are using their special powers, so to speak, or
Speaker 1: their powers to use it at this time and go about,
Speaker 1: you know, making sure these uninsured depositors are whole. But
Speaker 1: they're not coming up with a whole new system by
Speaker 1: which the other banks are going to have to kick
Speaker 1: in money. That that's pretty much established in the law.
Speaker 1: And I always wonder, like, how will that trickle down
Speaker 1: to the average investor? You know, might whatever the banks
Speaker 1: sort of have a higher cost. I cynically feel like
Speaker 1: that's going to trickle through to us and higher fees
Speaker 1: or less lending or something like that. Well, Susan, it's
Speaker 1: an interesting point because one of the things that the
Speaker 1: government really went out of the way to do in
Speaker 1: its statement when it was announcing all this was they
Speaker 1: basically said, look, investors, your take in your risks. Right,
Speaker 1: we're not bailing out shareholders so to speak. Here we're
Speaker 1: bailing out or they're not using the word bailing out,
Speaker 1: but they're protecting and making hold depositors. But they really
Speaker 1: went out of their way to say, look, if you
Speaker 1: bet on a bank or you bet on a company
Speaker 1: as an investor, this isn't making you hold. So if
Speaker 1: you want stock in the bank and the stock went down,
Speaker 1: they're not going to recoup your losses. Do your research,
Speaker 1: is what they're basically saying. And they're also saying, you know,
Speaker 1: the executives that were sitting at these banks which the
Speaker 1: government came in and took over after they were closed
Speaker 1: by state regulators, they're all gone too, right. I mean,
Speaker 1: they essentially said that they're not bailing out executives either.
Speaker 1: Our conversation continues after the break ben. Another thing that
Speaker 1: President Biden said in his speech on Monday Day was
Speaker 1: that he was going to strengthen bank regulations. I think
Speaker 1: a lot of us remember after the financial collapse in
Speaker 1: two thousand and eight, two thousand and nine, the Obama
Speaker 1: administration pushed through some pretty tough bank regulations to keep
Speaker 1: them from failing. That was over Republican objections, and then
Speaker 1: some of them were watered down a bit under Trump.
Speaker 1: What happened then and how did that play into what
Speaker 1: we're experiencing right now. Yeah, so it took all of
Speaker 1: I think three days for this to become the latest
Speaker 1: Washington partisan tug of war. Back in twenty eighteen, there
Speaker 1: was actually a bipartisan law that was passed by Congress
Speaker 1: that gave some of these smaller banks and smaller I
Speaker 1: mean including Silicon Valley Bank and the like. And Silicon
Speaker 1: Valley was the sixteenth biggest bank in the United States
Speaker 1: before its failure, so it's not small, but it gave
Speaker 1: these kinds of banks that aren't the big Wall Street
Speaker 1: banks you think of, effectively a way out of some
Speaker 1: of the really really really tough, onerous types of regulations
Speaker 1: like years least stress testing and some of the stuff
Speaker 1: that these big banks have to do every year. They're
Speaker 1: just like thousands of hours of work where the government
Speaker 1: comes in and really tests if you were in financial distress,
Speaker 1: would your bank fail. This idea that banks can't be
Speaker 1: too big to fail again. So they look at how
Speaker 1: much money do they have in deposits? What would they
Speaker 1: do if there was a sudden dip in the stock market.
Speaker 1: That's that's exactly right. And literally, almost since the big
Speaker 1: post financial Crisis law was passed in twenty ten, everyone
Speaker 1: calls Dodd Frank really almost immediately, these midsize banks were lobbying,
Speaker 1: and they're basically saying, we shouldn't be considered the same
Speaker 1: as Goldman Sacks or JP Morgan because we're not the same.
Speaker 1: We're basically just your you know, your your friendly neighborhood bank.
Speaker 1: We take deposits and you know, and we we help businesses,
Speaker 1: and we're not doing all these things that all these
Speaker 1: big Wall Street giants are doing. They lobbied, and they
Speaker 1: and they, and they kept pushing on it and pushing
Speaker 1: on and pushing on it, and finally, in twenty eighteen,
Speaker 1: bipartisan group of lawmakers passes a new measure which basically
Speaker 1: rolls back some of the restrictions they have. Trump signs
Speaker 1: it in the White House, has a big ceremony, calls
Speaker 1: it crippling regulations that are basically being stripped away. He
Speaker 1: says that these types of rules were going to make
Speaker 1: these banks go away one by one, and everyone seems
Speaker 1: to be kind of on the same page, except for
Speaker 1: some of the progressives who said this was really a
Speaker 1: bad idea, that this was a good thing to do.
Speaker 1: Fast forward five years later, and almost immediately from the
Speaker 1: moment Silicon Valley Bank failed, people are pointing to this
Speaker 1: roll back and saying, if this hadn't happened, we probably
Speaker 1: would have known a little bit more about what Silicon
Speaker 1: Valley Bank situation really was. Federal regulators may have been
Speaker 1: a little more prepared to know under the hood what
Speaker 1: was going on, and the bank itself would have had
Speaker 1: to have taken more care and not made certain kinds
Speaker 1: of bets that effectively, when interest rates shot up, really
Speaker 1: shot the bank in the foot. And by the way,
Speaker 1: some of the bank executives that were pushing hard included
Speaker 1: Silicon Valley Banks CEO Greg Becker, people like Elizabeth Warren
Speaker 1: are already jumping on that just a day later and saying,
Speaker 1: you know, look, all these all these bank executives were
Speaker 1: arguing for this rollback, and here we are, and you know,
Speaker 1: we already have two banks that have failed. Hey Ben
Speaker 1: that's funny. I was going to ask you about like
Speaker 1: what Elizabeth Warren is saying right now, But I also
Speaker 1: wondered how strong is the banking lobby in Washington. Banks,
Speaker 1: like a lot of industries in Washington, have a lot
Speaker 1: of firepower. They have a lot of lobbyists, and you know,
Speaker 1: they're they're quite good at getting access and oftentimes getting
Speaker 1: what they want. Suzanne, back to this question of what
Speaker 1: Biden can do to strengthen bank regulations. We saw them
Speaker 1: rolled back as Ben was talking about what can they
Speaker 1: do to prevent this sort of thing from happening? Again?
Speaker 1: What are regulations in that toolkit? There's a number of
Speaker 1: things that regulators could do. They could require banks to
Speaker 1: hold more capital on their balance sheet. You know, when
Speaker 1: you look at Silicon Valley Bank, they had a very
Speaker 1: extreme position in their assets and liabilities. Things like that
Speaker 1: could be more of these sort of stress test related
Speaker 1: type changes that could be done. But Ben, what do
Speaker 1: you what do you here? I mean, it's it's it's
Speaker 1: pretty interesting because the rollback was a bipartisan measure in Congress.
Speaker 1: So now to really really turn the screws, like perhaps
Speaker 1: Elizabeth Warren would like or her colleagues would like, Congress
Speaker 1: almost needs to do something again, and it's already looking
Speaker 1: like that's going to be hard. You have big kind
Speaker 1: of divisions already in terms of what Republicans are saying
Speaker 1: and what Democrats are saying. Unsurprisingly, but this moment, in
Speaker 1: this like hyperpartisan moment, this it's hard to see kind
Speaker 1: of a kumbayah where everyone agrees to tighten the screws
Speaker 1: on on banks right now, so that kicks it to
Speaker 1: the regulators. And the regulators can do some things, uh certainly,
Speaker 1: you know, the Federal Reserve, the FDIC, they all have
Speaker 1: powers and they can do more, but it can only
Speaker 1: go as far as the law will let them. And
Speaker 1: then there's a question of what could President Biden do
Speaker 1: on his own? Is there something he could do through
Speaker 1: executive action? Those are all the kinds of things I
Speaker 1: think are gonna have to be ironed out, you know,
Speaker 1: in the days ahead. He just basically said I want action,
Speaker 1: but didn't really say how that's going to happen. We'll
Speaker 1: be right back, Susanne. We started this conversation talking about
Speaker 1: how it affects individuals and how we can protect ourselves.
Speaker 1: One way, of course, as you describe as just having
Speaker 1: kind of good bank account hygiene, making sure that you
Speaker 1: don't have more money in the bank if you're so
Speaker 1: lucky than the limit allows. What else can people do
Speaker 1: just to stay safe in a time of volatility, right,
Speaker 1: I think we're in such a an out of control
Speaker 1: seeming environment that just, you know, taking controlling what you
Speaker 1: can control is really important. And when I was speaking
Speaker 1: with a financial planner earlier, he said that one of
Speaker 1: the biggest you know, quote air quotes some mistakes that
Speaker 1: he sees that people stop investing when they're feeling nervous. So,
Speaker 1: you know, when you're you know, you're putting away however
Speaker 1: much you can and four one K and you're like, oh,
Speaker 1: things are kind of crazy. I think I'll step back
Speaker 1: and maybe lower my you know, the percentage of my
Speaker 1: salary that I have going into my four one k.
Speaker 1: You know, that is really not the greatest thing to do,
Speaker 1: because a lot of times when people dial back their savings,
Speaker 1: they sort of forget to go back in and dial
Speaker 1: it up. So just sort of resisting the urge to
Speaker 1: stop a really good savings habit, if you have one,
Speaker 1: is something to keep in mind in the midst of
Speaker 1: all this turmoil, Suzanne, what about just other kinds of
Speaker 1: investments stock marketed bonds. Are there things that people should
Speaker 1: be doing now in the wake of this to kind
Speaker 1: of give themselves an extra layer of protection or comfort.
Speaker 1: I think people should take a look at their portfolio
Speaker 1: and make sure that they're still comfortable with the level
Speaker 1: of risk that's in their portfolio. You know, if they
Speaker 1: have a portfolio that's seventy percent in stocks thirty percent
Speaker 1: in bunds, they should take a look and make sure
Speaker 1: they're still comfortable with that split. But I think anybody
Speaker 1: who has a good long term plan or maybe as
Speaker 1: in say a target date fund, which is a kind
Speaker 1: of fund in the many four one ks have that
Speaker 1: is sort of geared toward a long term time horizon,
Speaker 1: and you don't want to make any rash moves to
Speaker 1: upset long term plans, because what we've seen in so
Speaker 1: many market crashes and panics over the decades is that
Speaker 1: it's the people who panic who sometimes just get hurt
Speaker 1: the most. And Susanne, that's that's exactly what the US
Speaker 1: government is trying to impart on everyone by what they've
Speaker 1: what they've done so far, everyone's trying to say, don't panic,
Speaker 1: just kind of hanging there, and the fact that the
Speaker 1: US governments stepping in with extraordinary measures. They really want
Speaker 1: people to feel assured that their money is going to
Speaker 1: be okay, They're going to be able to make payroll
Speaker 1: if they're running a business. And the question is is
Speaker 1: are all these other banks who may have been similarly
Speaker 1: positioned in terms of what they were holding on their
Speaker 1: balance sheet as the ones that have gone down, are
Speaker 1: they going to be okay? Are they going to be
Speaker 1: able to weather this? And that's the big question. Ben.
Speaker 1: You're covering all the ups and downs of this story
Speaker 1: as the fallout continues. I think we're probably gonna be
Speaker 1: talking about this for weeks to come or longer. What
Speaker 1: are you watching for? What are the things that you're
Speaker 1: especially looking for as the story keeps going. So far,
Speaker 1: we've had two banks fail in the span of less
Speaker 1: than a week and one bank voluntarily liquidate. The bank
Speaker 1: that failed, Silicon Valley Bank, was the biggest bank failure
Speaker 1: since two thousand and eight. What that means is everyone
Speaker 1: is un high alert. Everyone is trying to figure out
Speaker 1: our other lenders potentially at risk. If you look at
Speaker 1: the market moves If you look at regional lenders stocks,
Speaker 1: there's a lot of jitters out there. A bunch of
Speaker 1: firms are seeing massive declines in their share price. The
Speaker 1: question is has the government done enough to convince people
Speaker 1: that they've dealt with the problem. This was an isolated
Speaker 1: situation to a few institutions and everyone's going to be
Speaker 1: fine and we can move on. Or is this going
Speaker 1: to continue to kind of cascade? Is this going to
Speaker 1: be more of a domino situation. That's what I think
Speaker 1: everyone's watching right now. Ben Bam, Suzanne Willie, thanks for
Speaker 1: coming on the show. Thank you, Thanks guys, thanks for
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Speaker 1: The supervising producer of The Big Take is Vicky Virgolina.
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