Estimated reading time: 2 minutes
This was a great question from Senator James Lankford to Treasury Secretary Janet Yellen that highlighted the short-sightedness of the decisions currently being made.
In just the last 10 years,
The US banking system has gone from over 10,000 banks to just 4,780. precedent
And over 4,000 of those banks have under $10B in assets, which disqualifies them from being a Systemically Important Financial Institution (SIFI) (or the vernacular – Too Big To Fail – TBTF) and receiving this backstop on their deposits.
This new insurance (assurance?) given to large depositors of big banks is only going to cause further industry consolidation.
Some people are already fleeing tiny banks for the safety of a big bank or treasury bonds,
What’s to stop everyone else from doing the same?
If you are a large depositor,
And you know your money isn’t insured at your current bank,
But if you make a switch to a BIG BANK it will be insured,
Why would you stay?
This has the potential of being DETRIMENTAL to the US banking system. precedent
All thanks to “fear of contagion.”
The government is supposed to give fair and equal treatment to citizens and businesses.
This decision is a far cry from that.
We need clarity.
— Digging deep on banks is what I do.
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