Despite assurances from the federal government, including from President Joe Biden himself, bank stocks were hit hard Monday, in part over fears of depositors removing their cash from regional banks and moving it to larger banks that they consider more secure.
"Banks of various sizes in different parts of the country -- from San Francisco-based First Republic Bank to Salt Lake City-based Zions Bank -- found themselves battling market turmoil as customers rushed to withdraw their deposits and investors, worried about more runs, dumped bank stocks," The New York Times reported.
MarketWatch reported on the subject under the headline, "Regional banks are seeing flight of deposits to too-big-to-fail megabanks" (behind a paywall).
"Investors are dumping regional-bank stocks despite a fresh federal backstop," the site wrote.
If investors and customers both decide on their own that they don't trust government regulators to protect their interests in regional banks, that can only cause problems for those banks.
After regulators suddenly seized two banks over the long weekend, some customers and investors did, in fact, fear that the overall U.S. banking system was in trouble.
(The SVB collapse is explained in detail in an exclusive report for The Western Journal’s subscribers: “The Everyman’s Guide to SVB’s Fall.” Consider subscribing to The Western Journal to read content like this and to help us combat Big Tech’s attempts to demonetize us).
“What we have there is a 1929-style bank run, and that’s not a good sign for anyone," he added.
While U.S. banks stocks regained some of their lost ground in Tuesday morning trading, according to Reuters, investors were still watching closely.
"If we do not see any high-profile failures in the near future, then the fears would subside," Jack Ablin, chief investment officer at Cresset Capital, told Reuters.
That was a very different attitude than the one that caused bank stocks to fall so quickly that exchanges were forced to halt trading on some of them Monday morning.
The four stocks halted were PacWest Bancorp, Zions Bancorporation, First Republic Bank and Regions Financial.
First Republic's shares were down nearly 75 percent shortly after markets opened after dropping by what Bloomberg said was "a record 67% at the open before trading halted."
In an attempt to keep the sudden collapse of Silicon Valley Bank last week from causing widespread panic across the national banking system, the Treasury Department, Federal Deposit Insurance Corporation and the Federal Reserve stepped in with what Axios described as "aggressive new actions."
Following the trading halts, U.S. stocks in general began moving in a positive direction, and later closed essentially flat.
The federal agencies cited "systemic risk" to the industry in guaranteeing all SVB depositors fully, despite the normal $250,000 limit on deposit insurance.
"Depositors will have access to all of their money starting Monday, March 13," said a joint statement from the Treasury, Fed, and FDIC.
"No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."
The FDIC, which is funded by banks, will cover those expenses, the statement claimed.
This article appeared originally on The Western Journal.