Bank customers moved billions of dollars in deposits from smaller institutions to larger ones during recent banking turmoil, including the failures of Silicon Valley Bank (SVB) on March 10 and Signature Bank on March 12, according to The Wall Street Journal.
The 25 biggest banks in the country garnered $120 billion in deposits following the collapses and subsequent rescues federal regulators announced on March 12 while deposits at smaller banks fell by $108 billion, according to the Journal. These figures are for the week that ended March 15 and are based on data released by the Federal Reserve Friday.
“The reason people are more confident about having money in big banks is because they’ve already been designated as too-big-to-fail via their classification of systemically important bank (SIB),” E.J. Antoni, research fellow for Regional Economics at the Heritage Foundation’s Center for Data Analysis, told the Daily Caller News Foundation. “If Bank of America gets into trouble, depositors know the Fed, the Treasury, and the FDIC (Federal Deposit Insurance Corporation) will swoop in to save the day – at taxpayer expense no less.”
The non-seasonally adjusted Federal Reserve statistics indicate a decrease in bank deposits of $53 billion for the week, according to Bloomberg.
“The White House, the Fed, the Treasury, and others within the Biden administration have continuously waffled back and forth about whether all deposits at all banks are guaranteed,” Antoni told DCNF. “That uncertainty has led many people to withdraw their funds.”
After Bloomberg’s reporting that Treasury officials were studying methods to expand insurance to safeguard all deposits, not just those covered by the $250,000 cap, Treasury Secretary Janet Yellen said the FDIC will not be offering “blanket insurance” at a Senate Appropriations Committee hearing on March 22. (RELATED: Janet Yellen’s Policy Would Destroy Small US Banks While Bailing Out Chinese Depositors, Experts Say)
WASHINGTON, DC – MARCH 29: U.S. Secretary of the Treasury Janet Yellen speaks during a hearing before the House Appropriations Committee in the Rayburn House Office Building on Capitol Hill March 29, 2023 in Washington, DC. (Photo by Nathan Howard/Getty Images)
Alfredo Ortiz, president and CEO of the Job Creators Network, said the FDIC should bail out community banks if they fail too. He said they are essential to small businesses due to their level of customization based on the knowledge of their customers.
“One of the quickest ways of getting rid of small businesses is by eliminating their access to credit,” Ortiz told DCNF. “From that perspective, I think it is really important we do save our regional banks.”
Yellen received more than $7 million for speeches she gave to numerous companies in the two years before being confirmed as Treasury secretary including Bank of America, Goldman Sachs, Citi, Credit Suisse, UBS, Charles Schwab and many more, according to her public financial disclosure report.
The Department of Treasury did not immediately respond to Daily Caller News Foundation’s request for comment. The Federal Reserve Board declined to comment and directed the DCNF to its data on the assets and liabilities of commercial U.S. banks.
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