Recently the banks like $SVB Financial Group(SIVB)$ and $Signature Bank(SBNY)$ have failed. The US government has announced that they will cover even uninsured deposits without tax payers being burdened.
It is a good thing that all depositors will get their money back and the contagion will not spread
However this also sets a dangerous precedent and does not root out mismanagement, instead sending a wrong signal. The FDIC should only insure deposits upto USD 250,000 however now they are insuring all deposits.
The signal being sent out is that someone will cover you if banks fail, without limits. At one stage this may become untenable.
SVB Storm Attacks Bank Stocks
Sometimes, it takes just one snowflake to start an avalanche.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Comments