Following the recent issues at financial institutions across the country and the world, starting with the Silicon Valley Bank, many are wondering if we should be worried about banks moving forward.
Financial expert Pete Najarian joined News Talk 830 WCCO’s Jordana Green and Adam Carter to discuss the current situation and what it means for the average American.
News over the weekend broke that the world’s central banks came together to foster a deal to help stop the bleeding by having UBS Group AG buy its rival Credit Suisse Group AG in what Najarian is calling a “shotgun wedding” scenario.
“[UBS was] put into a position where they were asked to be somebody that could be the emergency rescue. And that’s exactly what they’ve done because Credit Suisse was in such trouble,” Najarian shared.
Credit Suisse has been around for decades. Najarian shared that even if the bank was destined to fail, its failure could have triggered a cataclysmic event resulting in other banks going red, something he said no one wants right now.
According to the Najarian, European banks have been struggling for far longer than U.S. banks have, even with the recent SVB collapse.
As for why struggles are becoming more common, Najarian says that the risk banks are taking on is getting to be too much.
“The problem is many of these banks really do put themselves out there and take incredible risks,” Najarian said. “By doing so, that can be okay when it works, but it’s just like being in a casino. It’s good until it’s not.”
While the average American may not have the financial literacy of an expert, Najarian simplified the current situation, saying that there were “a lot of loans that were given out that probably shouldn’t have.”
Najarian continued saying that the situation reached a tipping point as borrowers failed to pay back the money they took, and those who had savings at the back decided to pull their money out, leaving the bank in the red.
While nothing about the situation is comforting, Najarian said that most Americans can take a deep breath, as the FDIC protects your money, in each bank you are a member of, up to $250,000.
“The biggest concerns are, you got a million dollars in the bank, and everybody is making a run for it, and you’ve only got $250,000 protected: What happens with the rest of that money?” Najarian asked, noting that it could be split between four banks, and then it would be entirely protected.
After the financial crisis of 2008, Najarian said that the advice he always gives is to be aware of where your money is, what your exposure is in terms of the stock market, and what the risks are at your own bank.
To put it simply, Najarian says, “there’s a lot going on” with the current economic situation, and being aware is the best we can be.