by Michael Snyder, The Economic Collapse Blog:
The widespread panic that we just witnessed is definitely not what the bureaucrats at the Federal Reserve were anticipating. Following the second largest bank collapse in U.S. history on Friday and the third largest bank collapse in U.S. history on Sunday, the Federal Reserve unveiled an unprecedented rescue plan that was supposed to end the banking panic. If you have not seen it yet, you can view the details on the official website of the Federal Reserve right here. The most important part of the plan is the Fed’s decision to fully guarantee all of the deposits at Silicon Valley Bank and Signature Bank. As Goldman Sachs CEO Lloyd Blankfein explained on Twitter, this bold course of action was supposed to have “removed reasons for bank runs”…
TRUTH LIVES on at https://sgtreport.tv/
A few banks may have issues like SVB, but only a few. Govt actions removed reasons for bank runs. Biggest banks have much tougher regulation and stress testing. Anxiety and volatility high, but sharply lower interest rates, fed likely on hold, are strong positives for markets.
— Lloyd Blankfein (@lloydblankfein) March 13, 2023
But there was just one problem.
It didn’t work.
Right now, social media is being flooded with messages from ordinary Americans that withdrew money from their bank accounts on Monday.
Here is just one example…
This morning I began withdrawing my money out of my bank account at Wells Fargo it’s going to take several days because of the large amount of money I’m going to take the money and buy gold bullion and put the gold into my very secure gun safe #BankRuns #WellsFargo #bankrun
— Johnny7 (@stachowia1) March 13, 2023
When the Fed announced their plan, I understood that they were implicitly guaranteeing all of the deposits in the entire system.
But that is only because I am constantly writing about this stuff.
Needless to say, most Americans didn’t get the message, and so now Bill Ackman is calling on officials “to explicitly guarantee” all of the deposits in the entire system…
‘Our economy will not function effectively without our community and regional banking system. Therefore, the Federal Deposit Insurance Corporation needs to explicitly guarantee all deposits now. Hours matter,’ Ackman said.
‘We need to hear from our gov’t that it is explicitly committed to preserving our system of smaller banks. While each small bank is not “systemically important” like @jpmorgan or @Citi, collectively they are as, if not more, systemically important.’
Will an explicit guarantee work?
Maybe.
But what our leaders have tried so far has definitely not worked.
On Monday, Joe Biden publicly declared that the American people “can have confidence that the banking system is safe”, but that certainly didn’t reassure anyone.
Instead, regional bank stocks plummeted so dramatically that trading in dozens of them had to be temporarily halted…
Trading was temporarily halted in dozens of regional banks this morning as shares fell by up to 75 percent when the market opened after Joe Biden claimed ‘US banking is safe.’
The Biden administration has made it very clear that investors are not going to be bailed out when any of these banks fail, and the carnage that we witnessed on Monday was absolutely staggering…
San Francisco’s First Republic shares lost 61.8% on Monday after declining 33% last week. PacWest Bancorp dropped 45%, and Western Alliance Bancorp lost more than 47% as regional bank stocks fell sharply. Zions Bancorporation shed about 26%, while KeyCorp fell 27%. Other financial firms were also under pressure, as Bank of America slipped 5.8%, while Charles Schwab tumbled more than 11%.
Unless federal officials explicitly guarantee all of the deposits in the entire system, people are going to keep pulling money out of small and mid-size banks, and stock prices will continue to fall.
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