Bank failures were big recurring news stories just over a decade ago. The 2008 failure of Bear Stearns, then Lehman Brothers, signaled that the bubble in real estate had burst. The effects began a long cascade of regulators closing banks, peaking with 157 financial institutions closed nationally in 2010, with another couple of hundred closed over the next four years.
Georgia, with a system of small community based lenders focused on serving the real estate industry, was at the epicenter of the crisis. By the time it was over, a quarter of Georgia’s banks had been shuttered. There were complaints at the time that the bailout plans favored big banks over smaller ones, and the banks branded “too big to fail” grew stronger at the expense of community banking.
This is now old news, or at least it was until last week. During the five years preceding this one, only 8 banks failed in the entire country. No banks failed during 2021 or 2022.
Two weeks ago, Silvergate Capital announced it would voluntarily wind down its banking operations, with all depositors made whole. The bank was the largest focused on the crypto-currency community, and the crash of various crypto coins in the aftermath of the FTX scandal seemed to have put the writing on the wall for Silvergate’s future.
In the last couple of weeks, financial concerns increased. A run on California based Silicon Valley Bank caused a rare mid-week takeover of the institution, the second largest bank failure in history. Over the ensuing weekend, regulators in New York seized Signature Bank, the other major bank focused on the crypto currency community.
What is unusual about all three failures is that none of them were caused primarily by making bad loans. As such, the failures are somewhat difficult for those who don’t follow financial news closely to understand.
News networks that cater to their ideological bases were quick to blame “wokeism” or relaxed regulations, because –…
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