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Swimming Without A Bathing Suit

Swimming Without A Bathing Suit

March 13, 2023

There’s an old Wall Street saying, “You never know who’s swimming without a bathing suit until the tide goes out.” And so, apparently the naughty swimmers so far are Silicon Valley Bank and Signature Bank. Both regional banks were seized by regulators over the weekend, perhaps for different problems or underlying weaknesses.

Change, like rising interest rates, can expose weaknesses in a bank’s business model. Some business practices work quite nicely in a stable, low interest rate environment. But, when interest rates are rising, that same model can prove deadly if management is unwilling or unable to adjust. That is apparently what happened to both of those banks.  


The Federal Reserve has been tightening (raising interest rates) at a pace not seen in over 40 years and is projected to go even higher. That pace may slow somewhat. (We’ll see.) I don’t necessarily believe we have a banking problem in the U.S. although other smallish, regional banks may be exposed.  (We’ll see.) It is actually, a good thing, that the tide goes out from time to time to keep everyone honest and on their toes. You can bet every bank in America and beyond right now are on their toes checking to make sure their bathing suits are on good and tight.


As it stands right now, all depositors in those banks will have access to their funds without limit. Deposits up to the FDIC coverage limit of $250,000 were never in question.  So, if you have more than the FDIC coverage limit on deposit in a bank right now, it could be that you are not wearing your bathing suit. The FDIC limit is $250,000 per account. If you are currently over that limit, perhaps you should speak with your bank about making a change to get back under the limit, or move your excess cash to another bank. That is not a panic move. It is just sound business practices.


Please feel free to contact ModernWealthConcepts if you have any questions or concerns.