Economy

Biden tries to reassure US after latest bank collapse, as stocks fall

President Joe Biden tried to reassure depositors and encouraged more oversight after First Republic's collapse. Investors prepare for more failures.

President Joe Biden on Friday, March 17, 2023, in Washington.
AP
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It's the third major bank in the U.S. to collapse since the start of this year. And now, it seems, the failure of First Republic bank appears to have put the White House and Wall Street on edge as both are watching for which bank will be next. 

Federal regulators seized the bank on Monday, as President Joe Biden tried to reassure banking customers and pushed for more oversight to try and prevent the pattern from continuing. 

Biden called the U.S. banking environment "safe and sound," but investors were already anticipating another bank collapse as stocks fell on Tuesday. 

Smaller banks in the U.S. that have more of a risk from uninsured deposits are in focus for Wall Street. Those banks include PacWest Bancorp, Zions Bank, Comerica and Western Alliance Bank. It was unclear how much risk they faced, but speculation has the institutions reportedly coming up in conversation with experts. 

Deposits above $250,000 are not normally FDIC insured and banks like PacWest are said to have a significant amount of deposits that are above that amount. That could translate to significant liability for the U.S. economy. 

When Silicon Valley Bank and Signature Bank failed this year, the FDIC made an exception and insured deposits that exceeded that limit to try and mitigate further bank runs. It's unclear if the FDIC will continue the practice. 

More concerns

Commercial real estate loans are also a focus on anxiety for investors and the U.S. banking system. As companies need less office space because of the pandemic's effect of remote work trends, that has affected the investments in office space by companies. 

But there are other bumps in the road for the commercial real estate industry. Large companies have been making significant portions of their workforces redundant in recent months. Those layoffs have created even less need for office space, for those who were working in the office full time or under a hybrid model.

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