This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It

 

There was a good opinion piece by the editorial board at the WSJ last week after the bailout of Silicon Valley Bank was announced:

“For the second time in 15 years (excluding the brief Covid-caused panic), regulators will have encouraged a credit mania, and then failed to foresee the financial panic when the easy money stopped. Democrats and the press corps may try to pin the problem on bankers or the Trump Administration, but these are political diversions.

You can’t run the most reckless monetary and fiscal experiment in history without the bill eventually coming due. The first invoice arrived as inflation. The second has come as a financial panic, with economic damage that may not end with Silicon Valley Bank”

It certainly is frustrating to see that the risks for Silicon Valley Bank were in plain sight but regulators didn’t do anything about it. 

Thankfully in the short-term, I don’t think this will look like 2008, and the result of all of this will not be the total financial collapse and contagion spreading, but just more costly and ineffective regulations on banks that in the end will only lead to higher costs and fees for the average American, while doing little to nothing to prevent the next bank run. 

So while it’s frustrating to know that this could have been prevented by better management at the bank and better oversight by regulators, the point I want to make in today’s podcast is that it’s scary and you might even be angry when something like this happens, but it doesn’t mean it's time to panic. 

NO doubt in the aftermath of the Silicon Valley Bank failure, people did panic. I know of one person who went down to their bank and pulled out several thousand dollars to put in their safe at home. This is an emotional and bad decision. The money is much safer at the bank then in your safe at home. 

Many investors also took this as a sign of just the beginning of a collapse and sold. Thankfully, it doesnt seem to have happened en masse since the stock market didn’t budge that much in the day following the regulators stepping in and taking over. You’ll hear this episode about a week after I record so it remains to be seen how much investors panic and sell.

The worst thing you could do…

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance