Banking crisis: Your 5 most pressing questions answered


New York (CNN) Last week’s banking crisis left us with more questions than answers. The dramatic collapse of two American banks and investors’ loss of confidence in Credit Suisse led to violent market fluctuations and made Wall Street nervous.

During CNN’s primetime special, “Bank Bust: Inside the Collapse of SVB,” experts weighed in on how best to understand what’s happening in a rapidly evolving and confusing environment for financial institutions.

Here are five questions experts answered Wednesday night.

Is my money safe?

Former Treasury Secretary Larry Summers told CNN that despite scary headlines, now is not the time for consumers to panic.

“I don’t think this is a time for panic or alarm,” Summers said. “This isn’t 2008 where people had to worry about where to get their money from… It absolutely isn’t.”

“American money is safe,” he said.

Are the banks in a similar situation as in 2008?

CNN chief correspondent Christine Romans says this is not a repeat of the 2008 global financial crisis because banks do not carry toxic assets.

“You can’t anymore,” Romans explained. “They don’t have all that junk on their balance sheets anymore. They have to set aside more capital and the big banks have to undergo stress tests.”

However, Romans noted that smaller banks like SVB don’t face quite the same regulatory scrutiny as their larger peers.

“The verdict on the controversy over whether some of these smaller banks were allowed to participate in all…regulations is out and perhaps that gives them more exposure,” Romans said.

Some context: these regulations, passed in the wake of the Great Recession, set stricter rules for the banking industry. But small and medium-sized banks – those with assets under 250 billion each year.

Why did the SVB get special treatment?

After the Silicon Valley Bank collapsed on Friday, its customers were terrified. But on Monday they could breathe a sigh of relief — the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation had said over the weekend that every customer would be made well, even in excess of the $250,000 insured by the FDIC.

While it was welcome news for account holders, the extraordinary move raised some questions about why the FDIC was bending its rules for the SVB and its customers.

“I do think there’s a bit of moral hazard here,” said Lynette Khalfani-Cox, CEO of, referring to the idea that banks will take more risks if they think they’re going to be bailed out.

Why did the FDIC make the decision it made? The federal government does not want the failure of the SVB “to have a domino effect,” said Khalfani-Cox. “Federal regulators put them in the ‘systemic risk’ category, so they granted an exemption.”

What is this “moral hazard” thing?

You may hear economists and market analysts talk of “moral hazard” when discussing the bailouts of two US banks, Silicon Valley Bank and Signature, last weekend.

“Moral hazard” is a somewhat academic shorthand for the idea that banks (or other companies) take more risks if they think they will eventually be bailed out.

For example, some argue that SVB should have failed — that the pain of the consequences would outweigh the downside as customers lose their money and startups go out of business. Others, of course, note that the risk of failing the 16th largest US bank, and possibly its tech clients as well, could have far-reaching and potentially devastating consequences.

What is the fate of US mortgage rates amidst this chaos?

With all the panic in the market, it’s getting harder to buy a home, especially with government regulators like the Federal Reserve cracking down on banks after the SVB collapse. The Fed has also pursued a historic rate-hiking regime to keep inflation in check, and most economists expect this to continue.

“Realistically, I think based on what we’ve heard from the Fed that interest rates are likely to keep going up,” said Vivian Tu, a former JPMorgan trader.

“In addition, I think a lot of people are very concerned about, ‘Hey, if I’m saving for a down payment, is a bank a safe place to put that money?'”

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