ARI SHAPIRO, HOST:
Stocks sank again at the end of a very volatile week, one that started with the collapse of two banks. Despite emergency intervention by the government and some of the world's biggest banks, there are still worries that problems in the banking sector could spread. NPR's David Gura is following this. And, David, first walk us through what happened today on Wall Street.
DAVID GURA, BYLINE: Yeah, as you said, markets fell again today - the Dow by about 400 points - even though we had some really extraordinary developments yesterday. These 11 big banks, including JPMorgan Chase and Wells Fargo, announced this plan to deposit $30 billion in First Republic Bank. They were hoping that would stabilize it and that it would help convince customers there to stop withdrawing their money. They were also hoping it would calm markets more broadly, but it did not play out that way, Ari.
First Republic shares have been falling this week because of investors' fears it could be the next bank to fail after Silicon Valley Bank and Signature Bank. And while this deal was big and unusual, First Republic stocks sank again by more than 30% today, just illustrating something we've been talking about all week - that emotion is driving the markets right now. There is no indication that there are problems with First Republic or with the banking sector as a whole. But investors are worried there's more to come. Then in Europe, there was another deal. Switzerland Central Bank offered Credit Suisse about $50 billion in emergency funding. And still, Ari, its shares fell around 10% today.
SHAPIRO: And are we seeing this spread beyond the stock market and to other parts of the world?
GURA: We are. A lot of markets are being affected here, not just in the U.S. but also in Europe and in Asia. And because of all the volatility we've seen, investors are piling into gold. They're piling into government bonds. Of course, U.S. treasuries are seen as just about the safest investments out there.
SHAPIRO: What would it take to restore stability at this point?
GURA: Well, one thing it'll take is time. And regulators are hoping that people will take a breath. Cooler heads will prevail. But right now we're just not seeing any signs that's happening. And this story is moving so fast. I mean, just think. Since last Friday, we've had two bank failures, emergency interventions and these really wild price swings. And this frenzy is being fueled in part by social media as people speculate about what's happening, which is aggravating fears even more. Now, some big investors have been saying that if markets don't stabilize, there needs to be bolder action. Peter Orszag, who was President Obama's budget director who's now the head of the investment bank Lazard, argues this bank-by-bank approach we've seen is not working. He thinks we need something bigger. Orszag suggests the government should protect all deposits, including those that are larger than $250,000. This is what he proposed today on CNBC.
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PETER ORSZAG: The government needs to make explicit what I think a lot of people are assuming, which is that for the foreseeable future, uninsured deposits don't exist. Everything's insured.
GURA: That's unlikely to happen. Orszag acknowledged that's probably not going to happen anytime soon at least. But he said a bold move like that would do a lot to restore confidence in the banking system.
SHAPIRO: So what are you going to be watching for in the next few days?
GURA: Of course, the stock market is not open over the weekend, but at moments like this, weekends can be very busy. It was on Sunday in Washington that the government announced it was going to protect depositors at Silicon Valley Bank and Signature Bank just hours before markets opened in Asia. But without question, pay attention to what the Federal Reserve decides to do on Wednesday to find out how all that we've been living through this week will affect the Fed's strategy going forward. As you know, the Fed has been raising interest rates aggressively to fight high inflation. Will policymakers decide to pause those hikes to address all the instability that we're seeing? Andrew Patterson is an economist at Vanguard, and he's among those who thinks the central bank just can't afford to stop because inflation is still too high.
ANDREW PATTERSON: They'll incorporate it into their decision-making process. But they have been very clear all along that their primary focus is on inflation.
GURA: It's a tricky decision, Ari, and Wall Street is divided on what the Fed will do given, well, everything.
SHAPIRO: Yeah. NPR's David Gura, thank you.
GURA: Thank you. Transcript provided by NPR, Copyright NPR.
