Bank Failures

Bank failures have felt frequent in 2023. In early March, the Silicon Valley Bank and Signature Bank both failed within two days of each other, causing stress among politicians and the banking industry. 

The Federal Deposit Insurance Corporation (FDIC) reimbursed money lost during these failures, even when it exceeded $250,000. When providing aid to those who had money in the failed banks, the FDIC announced that, in the future, they would not be fully reimbursing beyond the $250,000 guarantee. 

Though many assumed that this would be a singular malfunction in the US banking system, more banks are closing.  Banking experts have found that rising interest rates and poor financial planning on the part of the banks have led to bank closures. Saving the banks has cost the US government billions of dollars.

In late April, the banking industry was once again disrupted by the failure of First Republic. Their stocks plummeted and trading was halted over a dozen times. During this time, the FDIC took control of the bank for a few days while a bidding process began. Many banks, including the infamous JP Morgan Chase Bank, began bidding for ownership of First Republic.

After negotiations, JP Morgan Chase acquired First Republic and all of its branches. They will assume all of the bank’s assets and deposits; however, they will not have any of First Republic’s corporate debt and will be receiving $50 billion in financing from the FDIC. From this deal, JP Morgan Chase will gain $2.6 billion, though it is expected to spend $2 billion on restructuring the bank through 2024.

Overall, lawmakers and politicians feel that the US banking system remains intact and is still incredibly strong. They believe that there is no need to panic over these instances of bank failure, but only time will tell if the regional banking system can remain stable.