After two U.S. banks failed, are other banks next?
SOUTHFIELD, Mich. (FOX 2) - Over the past couple of weeks, there have been two U.S. bank failures that are causing a lot of concern around the country. While the President says everything is okay, it doesn't mean people aren't worried about the future.
Could our neighborhood banks be next?
Federal Reserve Chair Jerome Powell acknowledges that people are concerned but says the system is safe.
"Banking problems, if left unaddressed can undermine confidence in healthy banks. Our banking system is sound and resistant with strong capitol and liquidity We will continue to closely monitor conditions in the banking system and are prepared to monitor all of our tools, as needed to keep it save," he said.
Powell is trying to calm nerves and claims there are not broad weaknesses in our banking system, despite Wednesday’s more conservative interest rate hike of 25 basis points.
"My colleagues and I understand the problem that high inflation is causing," he said.
Oakland University economist Dr Michael Greiner says this time, the stakes are higher if depositors decide they want to withdraw from banks.
As the fed has grappled with a decades-high inflation, which is decreasing but still outside of acceptable levels, Greiner said they're concerned about a run on banks, like what happened in 2008.
"That's exactly what the treasury department and the fed are all very concerned about right now. It's why, for example, Janet Yell stepped up and said that they were going to guarantee all deposits at the midsize banks because the fact that they don't want people to feel that they need to pull out their money," he said.
The country is now faced with the second-largest bank failure in U.S. history which has shaken confidence. Only 10 percent of adult Americans say they have "high" levels of confidence in the nation’s banking institutions.
"The banks that are having problems right now are really midsize.. move then into larger banks."7:34
Most people have their assets consolidated in a relatively small number of banks now. The banks are having problems right now are really these mid-sized banks, for example, Silicon Valley Bank Yes, they've got over $200 billion in assets but they're only the 16th largest bank in the country.
Powell also signaled that banks could pull back on lending to slow inflation. That could slow the economy and the fed predicts that the unemployment rate could be at 4.5% by the end of the year, up from 3.6%.