Ever since the crisis with Silicon Valley Bank (SVB) started and the banking systems having a downward spiral, I have been worried sick about my money in the bank and my company(ies)’s deposits across the board.
Now, I consider myself a semi-educated man when it comes to banking and financial systems, and yet I am still worried that our lawmakers and folks in charge (regardless of their party affiliations) have no sense of how nervous ordinary people are about their deposits. Case in point, Secretary Yellen’s comments to the senate at a hearing on March 22nd that the expansion of the insurance cap on the deposits ($250,000) is not something they have looked at!!!! ARE YOU KIDDING ME?? In this day and age that even a payroll run for a small to mid-size business can easily be above $250,000, how can we not consider raising the cap?
For years, the government and lawmakers, rightfully so, have been persuading everyone to deposit their money in the banks, trust the banking system, utilize the banking services etc. -How can we live in the best country in the world with the most sophisticated banking infrastructure and worry if our savings and checking accounts are safe and if our deposits in the bank will be there in the morning to run the payroll or pay the invoices or receive/transfer money?
On that infamous Sunday March 11, 2023, when the Fed, FDIC and the Treasury department stepped in and backstopped the deposits, I believe it was one of the most telling moments in our financial history. I was very proud of all parties involved to save hundreds of thousands of innocent depositors, individuals and businesses, who had no role in the fallout of the banks. Then why not fix this issue once and for all? Why not show the world that our bank deposits are the safest place you can put your money?
How about this: Why not have 3-5 “Government Backed” banks that will take in deposits for any amount and guarantee no loss of your deposits. You may make one or two percentage points on your money, but you will NOT lose a dime. In return, these banks will not loan any money to anyone, and only invest in US Treasuries overseen by the Fed, or FDIC or the Treasury. If those bonds ever go to zero interest rate, then the bank will charge a nominal fee for the deposits. Some people may say this is a socialistic idea, I say absolutely not, because you will have a choice to put your money in a normal bank, as we have it today, and earn more on your deposit, but risk the $250,000 insurance cap. Now the onus is on the depositor to take the risk.
Or better yet, as a bank executive friend of mine pointed out, have the FDIC charge the bank a little more and increase the cap to $5 million or $10 million. NO BRAINER….
I am sure there are many other answers/solutions, and there are many smarter folks to opine on those solutions, but whatever the answer is, PLEASE LET ME GET A GOOD NIGHT SLEEP.
Managing Partner, Naples Technology Ventures