SU professor says people shouldn't worry about their money after recent bank failures
Financial anxiety has skyrocketed after two banks failed this month.
California’s Silicon Valley Bank, SVB, and New York’s Signature Bank were both taken over by the Federal Deposit Insurance Organization (F.D.I.C.) after troubling withdrawal patterns emerged.
But Syracuse University Law Professor, Gregory Germain, said central New Yorkers should remain on solid bank footing.
“I think most central New Yorkers do not need to worry about their deposits,” Germain said.
Germain said most consumers have insured deposits, guaranteeing $250,000 should any banking trouble arise. Because a majority of SVB’s clients were businesses, many of the accounts at the bank were uninsured and had accounts that exceeded the F.D.I.C.’s assurance limit. Germain said the events surrounding SVB presented a unique case.
“Because those deposits were not guaranteed and ensured by the F.D.I.C, as soon as there was any whiff of financial problems at the bank, everyone rushed to take their money out and they had a traditional bank run,” Germain said.
Although he said most consumers should not worry about the banking system, Germain said financial concerns should be directed toward inflation.
“If the government doesn’t get control of inflation, it is going to have devastating effects on our savings, our investments,” Germain said.
He added that fixing the inflation issue will not be an easy task.
“It’s going to come with pain in terms of people’s employment,” Germain said. “It’s going to come with pain in terms of consumption and, you know, being able to afford goods.”
Germain said that it may take time before real financial security is felt.
“There’s going to be uncertainty for some period of time until we control inflation and have more stable prices and rates,” Germain said.