Banking Crisis? What Banking Crisis?

10 Jul

Banking Crisis? What Banking Crisis?

With big banks tumbling last March – First Republic Bank, Silicon Valley Bank, Signature Bank, and Credit Suisse – people were lining up to get their money out of banks.  Many of them, foreseeing more financial and monetary stress ahead – turned to gold and silver.

It turns out, as they suspected, that like a ticking time bomb, more banks are finding themselves in deep trouble.  As Wall Street on Parade puts it, “The banking crisis has pretty much disappeared from the headlines but the smoldering remnants of the crisis are very much still with us.”  The website decided to see how much stock prices have plunged for the nation’s 15 leading banks.  This would signal the assessments of the banks’ woes by those who follow the banks most closely.

It’s not a good picture.  Wall Street on Parade reported on those performances from the end of 2021 until last week:

Among the 15 largest banks, the following five banks have performed the worst in terms of share price declines since December 31, 2021: Truist Bank (ticker TFC), Citizens Bank (CFG), U.S. Bank (USB), PNC Bank (PNC), and Bank of America (ticker BAC).

Bank of America is the second largest bank in the United States with $2.5 trillion in consolidated assets and 3,804 domestic bank branches. It has lost 37 percent of its market value (market capitalization) in a year and a half.

As uninsured depositors, those with assets above the FDIC’s $250,000 insurance cap limit, began to make withdrawals, the runs began to snowball.  $42 billion was pulled from Silicon Valley Bank in a single day.

First Republic Bank, Silicon Valley Bank, and Signature Bank were the second, third, and fourth largest bank failures in history.  And yet, as Wall Street on Parade pointed out, those banks were not even on the FDIC’s “Problem Bank List.”

The moral of this story is that the banking crisis is far from over.  The Fed continues to promise higher interest rates to come, which will exacerbate troubles for banks that have mismatched deposits and loans, or in bank speak “have borrowed short and lent long.”  

Those that began moving to gold in March were just ahead of the curve, which is far better than being behind the curve.