What you can do to protect your money in the bank

Over the last few months, starting with the voluntary shut down of crypto bank Silvergate on March 8, there have been a series of bank failures. Just days later, two more much larger banks failed — Silicon Valley Bank, followed by Signature Bank. On May 1, we saw the failure of another bank, First

Republic. These were not small banks — they were in the top 35 largest banks in America out of over 4,000.

First Republic had approximately $229 billion in total assets and $103 billion in deposits as of April 13. Silicon Valley Bank, the second-largest bank failure at the time it folded, had $209 billion in assets and $175 billion in deposits. Signature Bank had $110 billion in assets and $89 billion in deposits.

Throughout this time, we’ve had everyone from FED chair Jerome Powell to Treasury Secretary Janet Yellen to Jamie Dimon, the CEO of America’s biggest bank, JP Morgan Chase, telling us the banking system is safe and sound.

Why does all this remind me of telling my wife to calm down when she is upset with me?

Repeating that the banking system is safe and sound and telling people not to panic while they are seeing banks fail and stock prices plummet is not the answer. People realize that they are not going to make good decisions using emotion. But greed and panic are both strong emotions. They make us want to act. Panic or fear of loss is more powerful even than greed or fear of missing out. When there is a lack of good information to make a decision, and there is fear of loss, panic ensues. What we need is a well-reasoned solution.

The problem is that the average American does not really understand banks and how they work. With the proliferation of new “experts” on social media, there is so much conflicting advice. Much of the social media hype is being instigated by the very people selling bank stocks short and profiting hugely from the panic of the masses. The smart money never panics.

So what can a business owner or regular citizen do to protect deposits over $250,000, the posted limit for FDIC insurance?

First, talk to your bankers and ask questions about the health of the bank. If you’re not knowledgeable about bank financial statements, you may need advice from a trusted source. Most bankers should be able to simply explain their balance sheet and why your money is safe. Don’t ask someone who is shorting bank stocks for advice on the health of your bank.

Second, you can move your money into separate accounts titled with different family members or entities to have as much as possible covered under FDIC insurance. Use the FDIC’s Electronic Deposit Insurance Estimator (EDIE) tool to calculate insurance coverage. Find it at edie.fdic.gov.

Finally, you can use a product from Intrafi, which most banks offer, that will give you FDIC insurance through something called Insured Cash Sweep or ICS. This allows FDIC insurance on all your money up to $150 million.

So please don’t panic. And try to support the bank you are currently banking with instead of moving to a “presumably” too big to fail bank.

We have over 4,000 banks in the U.S. There are banks of all sizes, and the smaller banks are the ones that make loans to smaller companies. Do you think your $500,000 or even $10 million loan makes a difference to a trillion-dollar bank? Do you want that much power consolidated in a few big banks?

We started Locality Bank bank after the COVID era Paycheck Protection Program because our local companies couldn’t get access to credit. The business owners here wanted a local bank whose founders and directors they knew. Keep in mind that your bank needs your support right now, and most of the local banks are built on relationships — relationships that will benefit the local communities that support them.