Story by Ryan Ermey
Late last week, Silicon Valley Bank disclosed signs of gross financial mismanagement, sparking panic among the bank’s investors and customers. By Friday, the bank, which caters to numerous startups, had halted trading on its plummeting stock, prompting a race among depositors to withdraw their money.
Regulators stepped in that day, shuttering SVB and seizing its deposits in the largest bank failure since the 2008 financial crisis and the second-largest in U.S. history.
Rumors swirled over the weekend about what this would mean for venture capitalists, for the tech industry, for startups and for bank customers nationwide.
By Sunday, the U.S. government provided some clarity, with regulators announcing that they’d fully cover deposits at SVB and Signature Bank (which also failed Friday after a bank run) while relying on Wall Street and financial institutions — not taxpayers — to foot the bill.
What does this mean for regular people? Well, you can stop replaying the events of the 2008 recession crisis in your head, says Brad McMillan, chief investment officer for Commonwealth Financial Network.
“We are not set for a rerun of the Great Financial Crisis. This is not the end of the world,” he wrote in Monday commentary.
Here’s how the SVB situation potentially affects your money.
Your bank accounts are likely safe
The institution that took control of SVB’s funds is the Federal Deposit Insurance Corporation, an independent federal agency that insures savings and checking accounts as well as money market accounts and certificates of deposit. In the case of the bailed-out banks, the FDIC is insuring all deposits, but under normal circumstances, deposits under $250,000 are generally covered.
“The vast majority of bank customers have cash balances that are below the FDIC insured amount,” says James Lee, a certified financial planner and president of Lee Investment Management in Saratoga Springs, New York. “Unless you have over $250,000 in a single institution, you should not be worried.”
If you have more than $250,000 in cash lying around in a single account, now may be time to think about diversifying, Lee says. The FDIC insures up to $250,000 per person, per bank and per account type, which means you can spread money around between accounts without exceeding the insured limit.
If you have a complicated tangle of joint and individual accounts, use the FDIC’s Electronic Deposit Insurance Estimator tool to get a better idea of whether or not you’re fully covered.
Make sure your portfolio is diversified
In a White House speech on Monday, President Joe Biden reassured small business and individual account holders at the failed banks that they’d be made whole. SVB and Signature Bank investors? Not so much…
READ FULL ARTICLE HERE… (msn.com)
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