MARY LOUISE KELLY, HOST:
Today, President Biden sought to assure Americans the banking system is safe after the government rescued customers of Silicon Valley Bank and Signature Bank.
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PRESIDENT JOE BIDEN: Your deposits will be there when you need them.
KELLY: But Wall Street remains worried, and shares of regional banks sank. NPR's David Gura joins me. And, David, bank stocks going down, down, down, down, down, down, down today. What's going on?
DAVID GURA, BYLINE: Yeah. Investors are concerned other banks could collapse. And just to recap quickly what's happened here, on Sunday, regulators announced they'd taken emergency measures to make sure all customers of those two banks you mentioned, Silicon Valley Bank and Signature Bank, could access their money. But despite that, shares fell of regional banks and banks that have a lot of deposits that are not insured by the FDIC, deposits that are larger than $250,000.
First Republic Bank is one of those. It caters mainly to wealthy clients, tech companies. It's headquartered in San Francisco, and its share price fell by more than 60% today. The Nasdaq temporarily halted trading of its shares shortly after the opening bell. KeyCorp and Comerica were down about 25% each. Zions Bancorporation of Salt Lake City was also down, again, Mary Louise, after President Biden told Americans not to worry about the health of the banking system.
KELLY: Yeah, President Biden's saying not to worry about the health of the banking system. Are we buying this? Is the banking system safe?
GURA: Well, there's no indication other lenders are in financial trouble, but administration officials emphasize they're being vigilant. It's important to note that yesterday, the Federal Reserve said it's willing to provide loans to any other banks that encounter difficulties. But we've had three banks close in the span of one week. Silvergate Bank, which is known for lending to crypto companies, is winding down its operations and paying back deposits.
Chris Kotowski is a longtime bank analyst. He's with Oppenheimer, and he told me he's of the belief this is going to blow over, although it is going to take some time. He says at their core, these companies are solid, and this is not a replay of the global financial crisis.
CHRIS KOTOWSKI: If you think about the current problem - right? - it's not that the banks made a bunch of bad loans. The current problem is that maybe they bought a few too many government-backed securities.
GURA: That's partly what led to Silicon Valley Bank's collapse. Normally, government bonds are among the safest investments around. But when interest rates rise really fast as they have, that's not the case. Their value diminishes. And Silicon Valley Bank sold a big chunk of its bond portfolio at a $2 billion loss to keep up with demand for customer withdrawals.
KELLY: OK. Stay with that point for a second - the customer withdrawals - because this is so interesting how the psychology of bank customers would contribute to what's going on.
GURA: Yeah. What's driving this now is how people feel. And it is really hard to stop a bank run once it gets going. People start making emotional decisions. Matthew Richardson is a finance professor at the NYU Stern School of Business, and he explained the psychology to me of bank customers at a moment like this.
MATTHEW RICHARDSON: Now, let's take some of these other banks. Maybe they're much healthier, but at some point, I don't care so much about the health of the bank. I'm concerned about what the other depositors are going to do.
GURA: You're looking to the right and to the left. And that's what's difficult here, Mary Louise. No matter how healthy banks are, if depositors feel skittish and take their money out, things can really snowball. It leads to even more fear about the bank even if the Fed is offering short-term funding, as it is.
KELLY: OK. So give me a roadmap for the next few days. What should we be watching for?
GURA: Yeah. We're going to see if this blows over. But I'll note this is playing out at a very tricky moment because investors already felt like the market is weakening. You know, before this, Wall Street's preoccupation was with trying to figure out the Fed's next move. You and I have talked about this an awful lot - if recent economic data which have come in stronger than expected will propel it to raise interest rates more aggressively to fight high inflation. What's happened in recent days could make them warier. And a discussion is underway about whether there needs to be new banking regulations. And the president has resolved to get to the bottom of what led to these bank collapses that we've seen over the last week.
KELLY: NPR's David Gura. Thank you, David.
GURA: Thanks, Mary Louise.
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