A former chairman of the Federal Deposit Insurance Corporation (FDIC) warned Wednesday that there will “probably” be more bank failure, saying there was “cleanup” to do in the wake of the collapse of Silicon Valley Bank (SVB).
Federal regulators shut down SVB Friday after its stock price collapsed and customers began a bank run following the financial institution’s disclosure of a $1.8 billion loss on asset sales due to high interest rates, CNBC reported. Depositors who had accounts at Silicon Valley Bank and Signature Bank, which was shut down by regulators Sunday, will be able to fully recover their funds, the FDIC announced in conjunction with the Treasury Department and the Federal Reserve Sunday.
“I do think there’s probably going to be more failures along the way. 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,” William Isaac, who chaired the FDIC during the Reagan administration, told Fox News host Neil Cavuto. “The thrifts were not, either. We wound up losing some 5,000 banks during that period.”
WATCH:
Signature Bank’s shutdown was precipitated by a bank run by customers following the collapse of Silicon Valley Bank, Barrons reported.
“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,” Isaac said. “I’m not concerned a lot about contagion. I believe the government knows what it’s doing. It’s willing to take actions. It knows how to take those actions. I don’t think this is the last failure. I think we’ve got some cleanup to do.
Credit Suisse and First Republic were among banks who saw their stock prices plummet this week. Isaac criticized the government for what he said was “awful” fiscal policy.
“The government has had irresponsible fiscal policies for 20 years and pretty irresponsible Fed policy … for the same period until recently,” Isaac said. “We have to get the monetary policy in line with where it needs to be. If we do those things, we can get out of this with minimal damage.”
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