On Wednesday, a former chairman of the Federal Deposit Insurance Corporation (FDIC) warned that there will “probably” be even more bank failures in the United States following the failure of the Silicon Valley Bank (SVB), describing it as a “cleanup” process.
The Daily Caller reports that William Isaac gave his warning on Neil Cavuto’s show on Fox News, saying “there’s probably going to be more failures along the way,” and that “the problem we have is the same one that we had back in 1970s when the government was out of control with its fiscal policies, its monetary policies, inflation set in, and banks were just not ready for that.”
“The thrifts were not, either. We wound up losing some 5,000 banks during that period,” Isaac noted further. “We won’t lose anywhere near that number this time because we don’t have that many. We lost so many. We only have about 4,500 banks today,”
Although Isaac said that he is “not concerned a lot about contagion,” and believes “the government knows what it’s doing,” he nevertheless warned “I don’t think this is the last failure. I think we’ve got some cleanup to do.”
SVB collapsed over the weekend after disclosing a loss on asset sales of $1.8 billion due to high interest rates, which triggered a collapse in its stock price, a bank run by its customers, and a shutdown of its operations by federal regulators. Another bank, the New York-based Signature Bank, was also shut down on Sunday. SVB was valued at around $209 billion in assets at the time of its failure, thus marking the second-largest bank failure in U.S. history, only behind the 2008 financial crash.
On the Monday after the crash, most banks across the country saw massive declines in their stock values, including Credit Suisse and First Republic, leading some to warn that a second major crash could be imminent.