An Investor Named David Sacks Claims That Another Regional Bank Run Is Underway After the SVB Collapse
David Sacks, a former PayPal executive, internet investor, and entrepreneur, reports that a second regional bank is already experiencing a bank run after the sudden failure of Silicon Valley Bank.
In a recent interview with UnHerd, Sacks reveals that he knows at least one other bank already seeing massive withdrawals from corporate customers.
When asked if he is referring to consumers currently taking vast sums of money or those planning to withdraw on Monday, Sacks said that the answer is both.
Before establishing the Federal Deposit Insurance Corporation (FDIC) one hundred years ago, the United States had panic every decade. We would have constant bank runs. That was a common occurrence. It would be sufficient to spread the word that a bank was experiencing difficulties for individuals to rush to withdraw their funds, creating a self-fulfilling prophecy. This sort of incident roiled the American economy for decades, finally leading to the collapse of the banking system in 1933.
Sachs argues that it is safer for companies to move their money from a smaller bank to a bigger, too-big-to-fail bank, as the Fed is more likely to provide unconditional support to a major bank in crisis.
According to Sacks, the issue’s foundation is that FDIC-insured bank accounts are covered for a maximum of $250,000 only.
You must consider game theory, which dictates that you can transfer your funds back in a few weeks if the rumor is false and the bank is in good standing. There is no penalty for withdrawing all of your funds. But if the report is accurate, you can rescue it all.”
World markets are awaiting the U.S. Treasury’s response on Monday and if the Biden administration would guarantee that all Silicon Valley Bank depositors will be compensated in full.
SVB fell last week when the bank disclosed $1.8 billion in losses, most of which resulted from the sale of US bonds whose value fell due to the Fed’s relentless rate rises.
Sunday on Meet the Nation, Treasury Secretary Janet Yellen said that a 2008-style rescue of SVB is not viable.
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