America's Talking - Americans’ Banking Fears Worst Since 2008 Financial Crisis

Episode Date: May 7, 2023

Americans are worried about the safety of their money in the banking system after multiple banks have collapsed in recent weeks, according to a new poll. Gallup released the survey data, which showed that 19% are “very” worried about the safety of their money in banks and another 29% are “moderately” worried. Support this podcast: https://podcasters.spotify.com/pod/show/america-in-focus/support Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Greetings, everyone, and welcome to America in Focus, powered by the Center Square. I am Dan McAulb, executive editor of the Center Square Newswire Service. Joining me today is Casey Harper, the Center Square's Washington, D.C. Bureau Chief. We are recording this on Thursday, May 4th. More concerns about the troubled bank industry, Casey, with the FDIC recently taking over the embattled San Francisco Bank First Republic and then auctioned off to J.P. Morgan. And there's a bit of a debate out there about whether or not that's a taxpayer about bailout or not. You talk to some folks who thinks it is, some who think it is not.

What's going on? Yeah, I mean, this is, you know, one of those stories that can be kind of technical. But as we learned in 2008, what banks do with the federal government when it's kind of technical can impact all of our lives pretty significantly. So this is one of multiple banks that has collapsed First Republic. FDIC regulator, you know, regulators took it over earlier this week. As you said, auctioned off to JPMorgan. This is significant because it is another bank failure that's coming after these Federal Reserve rate hikes have strained banks that took on a lot of treasuries and bonds.

And there's other reasons that they're struggling. But there's a lot of fear that this is not the last bank, that other regional banks, in particular, smaller banks that can't handle these kind of shocks that the Federal Reserve is throwing at it and other economic factors are throwing at it that they're going to go under and start a domino effect. there's that concern, right? And then there's the question of, okay, what does the federal government do about it? They just raised federal reserve, the federal funds rate again, the Federal Reserve Board did. So that's going to, that's keeping happening. It's unclear.

They signal they might raise it again, which is worrying a lot of economists and experts. So it could get even worse pressure on the banks as they're already unstable. And then meanwhile, the federal government has done so far could amount to a bailout. Depends on who you ask. And I did talk to experts, as you said. So essentially, J.P. Morgan bought this bank. They get, you know, get their assets. And essentially, they got a good deal. They almost immediately turned a profit, right? So the question is, is making, you know, a couple of a couple billion dollars for a big bank when they purchase something from the federal government. Does that come a taxpayer expense? I think you could say yes, but the question is, isn't that worth it? Because the

threat to the banking system right now, Dan, is really great. And they'll say, hey, we have to stabilize this. It may cost taxpayers now, but it'll save them more down the road. Of course, you've got the debt ceiling crisis that Congress and President are going back and forth about Treasury Secretary Janet Yellen says the U.S. will default on its debt, maybe as early as June 1st, if some sort of a compromise is not reached to raise the debt ceiling, Republicans in Congress want that to come with spending cuts. Biden says no way, so who knows? So this entire financial system in the United States,

including these failing banks, including the Fed continuing to raise interest rates, which as you mentioned they did again earlier this week, what was it like the 10th time since early last year that they've raised interest rates to deal with rising inflation. It's just, man, it's got to be interconnected to the point where, you know, I probably should be a little bit of, worried about it as well. Yeah, I mean, a lot of Americans are pulling has shown that they're

growing increasingly worried. Small businesses, the National Federation of Independent Businesses released a survey which found that small businesses are, you know, pretty worried about this. And it's interesting that small businesses use regional banks a lot. They rely on these smaller banks. They like having their relationship. Maybe they have a little bit easier time getting capital from the local bank, but they have a relationship than they would with someone like J.P. Morgan where it's more corporate, it's more official. And so these small businesses actually more reliant on these regional banks, which could be in danger now.

So they're even more exposed, more vulnerable. But we've kind of got ourselves into a situation, Dan. We shut down all businesses in the pandemic. Then we spent several trillion dollars, basically just increased the money supply by, I think more than 40%. That inflation got really bad to deal with inflation. We raised all these interest rates to make it come down, but it hasn't really come down as much as experts hoped. And now these interest rates are making the banks collapse.

But inflation hasn't even been solved yet. So we basically can choose between elevated inflation or the banking system being okay. And meanwhile, there seems no signs of lawmakers in Congress really wanting to change their ways on either side of the aisle and, you know, cut spending down to where we're not. actually raising these huge deficits every year. Should I be stuffing my mattresses with cash, Casey, or going out and buying gold? Is it, are we at that point yet? I'll never tell anyone not to buy gold because, you know, you never know. Stuffing your mattress with cash, no, no, I'd hold off on that one.

Listeners can keep up with this and other important stories at thecentersquare.com or Casey Harper. I'm Dan McAidlop. Thank you for listening.