48% of Americans concerned about safety of their money, multiple bank stocks plunge rattling Wall Street

Daniella Genovese
Fox News
Sat, 06 May 2023 00:44 UTC

© Robert Nickelsberg / Gettyimages.ru

FILE PHOTO: Wall Street

The Wall Street Journal chief economics correspondent Nick Timiraos discusses how the Silicon Valley Bank collapse weakened the banking industry on 'The Big Money Show.'

Nearly half of Americans are losing their faith in banks after the U.S. banking system faced a series of blows that was an eerie reminder of the 2008 financial crisis.

According to a recent Gallup poll, 48% of Americans are concerned about the safety of their funds in banks or other financial institutions. Of them, about 19% reported feeling "very" concerned, and 29% said they were "moderately" worried, according to the data.

Comparatively, about 30% were "not too worried," and 20% weren't stressed at all.

The survey was conducted a month after Silicon Valley Bank and Signature Bank came crashing down in March, marking some of the biggest bank failures in U.S. history.

However, the poll was taken before regulators seized troubled First Republic Bank early Monday, which marked the second-largest bank failure in U.S. history.

Still, the latest data gathered was similar to the level of concern Americans expressed during the 2008 financial crisis, which was the last time Gallup gauged Americans' worry of the banking system.

In September 2008, after Lehman Brothers crashed (still the largest bankruptcy filing the U.S.), 45% of adults expressed that they were either very or moderately worried about the safety of their funds, according to Gallup.

Those most concerned about the safety of their money following the recent failures are lower-income adults, those without a college degree and Republicans, according to the data.

Comment: Perhaps this reflects the demographic that is least swayed by the government's financial propaganda messaging.

Gallup noted that this could be because they are dissatisfied with the current administration and the current economic climate, or because they are unfamiliar with Federal Deposit Insurance Corporation (FDIC) insurance.

It is "unclear whether Americans' heightened concern about their own deposits reflects a lack of awareness of the protections for small accounts provided by federal deposit insurance or their fear of a snowball effect that could bring down federal insurance as well," Gallup said.

The FDIC is a U.S. federal government agency that was formed during the Great Depression to restore faith in U.S. banking institutions.

Today, the FDIC insures $250,000 per depositor, per insured bank, for each account ownership category. If a person has money deposited different banks, the amounts would each be insured separately up to $250,000.

If your money is tied up in an account at an FDIC-insured bank, and it's less than $250,000, you'll get it back even if the bank fails.

Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch.

Comment: RT reports:

US banking crisis deepens

Regional lender PacWest Bancorp has become the latest American bank to be caught up in the worst crisis in the sector since 2008. The bank has confirmed it is in talks with potential partners and investors about strategic options, following a 60% stock rout.

Shares in the bank nosedived in after-hours US trading on Wednesday over reports the Los Angeles-based lender was mulling a sale. PacWest's shares were down as much as 48% in early trading on Thursday.

"The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news," PacWest stated on Wednesday. "Our cash and available liquidity remain solid and exceeded our uninsured deposits," it added.

According to the lender, discussions with potential buyers and investors "are ongoing" and the company will continue "to evaluate all options to maximize shareholder value."

People familiar with the matter told Bloomberg that PacWest has been considering a breakup or a capital raise. A buyer would potentially have to book a big loss marking down some of the bank's loans, sources said.

PacWest's Wednesday selloff followed US Federal Reserve Chair Jerome Powell's announcement that authorities were closer to containing the turmoil that has gripped the banking sector. Powell claimed that the government seizure and sale of struggling First Republic Bank to JPMorgan Chase was "an important step toward drawing a line under that period of severe stress" for regional lenders.

First Republic became the fourth US lender to collapse this year, following Silvergate Capital, Silicon Valley Bank, and Signature Bank.

Meanwhile, chief market analyst at KCM Trade, Tim Waterer, told Bloomberg that the Fed's statement offers little in the way of confidence for the market. "Despite the best efforts by Jerome Powell to calm the market, there is nothing to suggest that the banking crisis is at an end," he claimed.

Bloomberg reported on May 3rd:

Wall Street Rattled by Selloff, Trading Halts at Two Small Banks

For many traders, the timing couldn't be worse.

On the eve of the Federal Reserve decision, multiple volatility halts in PacWest Bancorp and Western Alliance Bancorp were seen as disturbing. Both shares were down at least 15% in Tuesday trading. The financial industry weighed heavily on the S&P 500 Index, which sank almost 2% at one point.

Bearish hedge-fund traders were present in a bout of selling that later prompted long-only investors to sell too, according to a note from John Flood, a partner at Goldman Sachs Group Inc.

"Wall Street is quickly hitting the sell button as banking turmoil appears it is not going away anytime soon," said Ed Moya, senior market analyst at Oanda. "Risk appetite did not stand a chance as traders focused on lingering doubts over the regional banks, rising recession odds, and growing risks that the US could default on its debt next month."

All of these factors combined are only deepening a sense of uneasiness among investors about the Fed's conundrum.

In addition to the financial strains stemming from bank failures, officials remain caught between stubbornly high inflation and data pointing to an economic downturn — such as Tuesday's JOLTS record of job openings that fell to the lowest in nearly two years.

Debt Ceiling

To make matters worse, there's brewing angst over the US debt ceiling — which only adds to the whole discussion on whether the Fed should pause after hiking in May to prevent a more severe economic recession.

While swaps are still pricing in a quarter-point Fed rate increase this week, traders trimmed their bets on a subsequent hike — while amping up wagers on cuts before the year is over.

With all those elements in play, it shouldn't come as a surprise that bonds got heavily bid Tuesday — especially after the selloff of the previous session. Two-year rates, which are more sensitive to imminent Fed moves, plunged as much as 21 basis points to below 4%.

Meantime, Treasury bill yields for June topped 5% in the wake of a warning from Janet Yellen that the US government could run into debt-ceiling limitations as soon as the start of next month.