Happy Friday, everyone. It's been one week since Silicon Valley Bank failed, and the good news is that things seem mostly okay. The decision last Sunday by banking regulators to expand FDIC insurance in order to fully backstop depositors appears to have had its desired effect, and alarmist fears of bank runs across the land have not materialized. Still, there's reason to be uneasy.
A separate banking disaster is unfolding across the Atlantic as initial attempts to prop up Credit Suisse have so far failed to reassure investors, leading the bank's share price to plunge and the cost of insuring its debt to soar. It's unclear how much contagion the collapse of Credit Suisse would produce, but it's hard to see the markets shrugging off such an event.
In the U.S. meanwhile, big banks like JPMorgan Chase put together a consortium to prop up the deposit base of troubled First Republic. This is good news insofar as it shows the banking sector is able to head off problems without the direct intervention of the government, but this ability could be tested if other regional banks struggle to stay afloat. The giants can come together to save one bank, but it's unlikely they can repeat the trick five or 10 more times.
The events of the last week have also shown that, as with any crisis, certain political leaders will exploit the situation to score points and push an unrelated agenda. This was most evident in the idiotic critiques by some GOP members that banks are failing because of "woke" policies rather than a failure to manage short- and long-term liabilities. But it's also been evident in the push by Sen. Elizabeth Warren (D-Mass.) and other Democrats to pin the blame for the current banking mess on the crypto industry.
One final conclusion from this week is that it's good to remain humble in the face of financial markets. Just as in 2008, regulators and financial experts failed to foresee a crisis in the banking sector, and this led to panic. Until last week, the idea of 1930s-style bank runs seemed a thing of the past but here we are. The difference is regulators are armed with more knowledge and better policy tools than in the past—let's hope that's enough to stanch a crisis that feels far from over.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
