Should You Be Worried About Banks Collapsing? (Here’s the Truth)
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Should You Be Worried About Banks Collapsing? (Here’s the Truth)
In the wake of significant financial crises and economic recessions, the possibility of banks collapsing has become a topic of concern for many individuals. While it is natural to worry about the stability of financial institutions, it is important to separate fact from fiction and understand the comprehensive measures that governments and regulatory bodies have put in place to protect depositors and maintain the integrity of the banking system.
First and foremost, it is crucial to acknowledge that the global financial landscape has transformed significantly since the notorious collapses of Lehman Brothers and other major banks during the 2008 global financial crisis. Governments and central banks learned valuable lessons from this event and have taken substantive steps to strengthen the stability and resilience of the banking sector.
Most countries have implemented stringent regulations and safeguards to prevent banking failures. These regulations typically involve capital adequacy requirements, stress tests, and continuous monitoring by regulatory bodies such as central banks and financial supervisory authorities. These measures aim to ensure that banks maintain adequate capital buffers to absorb potential losses and minimize the risks associated with liquidity problems.
Furthermore, many governments have established deposit insurance schemes to protect savers in the event of a bank failure. These schemes vary from country to country, but generally guarantee a certain level of coverage for deposits held in licensed banks. The existence of deposit insurance schemes provides additional confidence to depositors and serves as a safety net in case of an unexpected collapse.
Another important factor to consider is the existence of central banks, which play a crucial role in stabilizing financial systems during times of crises. Central banks have the ability to provide emergency liquidity to struggling banks, preventing a rapid domino effect and mitigating the risk of widespread collapses. These institutions act as lenders of last resort, supplying necessary funds to maintain the stability of the banking system, and are ready to step in if necessary.
Additionally, the implementation of rigorous risk management practices and regulatory frameworks has significantly reduced the likelihood of banks taking excessive risks or engaging in activities that could jeopardize their stability. Greater transparency in reporting and increased scrutiny by regulators have been crucial in maintaining the health of the banking sector.
That being said, it is important to remain vigilant and informed. While the overall risk of a bank collapsing has significantly diminished, it does not imply complete immunity. As with any investment, diversification is key. Spreading your funds across multiple banks or financial institutions is an effective way to lower the concentration risk. Moreover, staying informed about the financial health of the bank(s) where you hold your deposits and monitoring any changes can provide an added layer of security.
In conclusion, while the possibility of banks collapsing understandably raises concerns, the current global banking system is far more robust and resilient than it was before. Governments, regulatory bodies, and central banks have made significant strides in preventing systemic failures and protecting depositors. It is essential to stay informed, practice diversification, and have confidence in the established frameworks that safeguard the banking sector.
OMG….if a bank crumbles from being insolvent during a panic run…and they are insolvent from the interest risk of long term duration bonds going upside-down….and those same bonds that the Fed coerces "systemically important" banks to hold on their balance sheet went upside down from the FED ratcheting up the federal funding rate…..THEN those depositors under 250k are paid out from FDIC receivership, which are paid out from the tax base, as a DIRECT RESULT of the Fed crushing those banks….
how is that an OK thing, again???
Don't worry, us taxpayers will eventually end up covering the losses…
These two have excellent on-camera chemistry. Nearly rivals the Bo & Brian combo, IMO.
: )
How come you recommend finding diverse banks for monies over 250k instead of using a sweep account? also fdic limit is 250k per person so joint accounts are double if 50/50 interest
This whole topic has been so overblown by the media. It’s a complete non-event for most people, but bailing out those with large deposits is worthy of some debate.
On a different topic, Rebie looks especially pretty in this video!
Thanks for answering my question! I've been around since you guys had 30k subscribers, and the wealth of knowledge you've given me is great! My family is forever thankful.
James 5 verse 1 – 5 – Warning to Rich Oppressors – Now listen, you rich people, weep and wail because of the misery that is coming on you. Your wealth has rotted, and moths have eaten your clothes. Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. You have condemned and murdered the innocent one, who was not opposing you.
Silicone Valley!
FYI he said Ally…. DONT USE ALLY THEY ARE WORSE THEN SVB lol he prob didn’t know that
“Josue” = “Joe-Sue”
Great episode! We do love the weeds!
Wealthfront cash accounts offer $2M since they spread the money among 8 bank accounts. If you have some money directly in one of those banks you could work with Wealthfront to use a different bank for your account
I'm a little upset this wasn't highlighted. I've heard from a few different places that "taxpayer money isn't being used to cover deposits".
I heard the money is coming from the FDIC fund which banks pay into. Sure, if that's true that still has its own issues that could be problematic later, but they're different from those bailouts like in 2008.
Does anyone have clarification on this?
Please look up the definition of 'pandemic' before yo continue to 'blame' things on the 'pandemic'.
Sili-CON not Sili-CONE. One is for computers, the other is for….
How risky is a fidelity or vanguard money market fund? I don’t think those are FDIC insured but I’ve never heard of one going down in value
Love the content! Bo's voice carries a lot further than others. Sound dampening foam wherever possible might be nice for headphone users