Behind the mega-withdrawals from U.S. banks

FPI / June 21, 2023


Wealthy Americans are demonstrating their faith in the banking system. They are withdrawing billions of dollars from U.S. banks.

The failure of banks such as Silicon Valley Bank has led wealthy Americans to pull their funds from U.S. banks at a record pace in 2023.

In the first quarter of 2023, $472 billion was withdrawn from U.S. banks, the largest amount since such data began being recorded in 1984.

“Want to know what happens when the rich lose confidence in their banks? It’s happening now in America and will probably spread to Europe as well,” independent journalist Steve Rodan noted in a June 15 analysis.

Americans with assets well above the insured limit of $250,000 set by the Federal Deposit Insurance Corp. are the ones pulling their money out of the banks.

The wealthy aren’t taking chances after the recent collapse of several major banks, including Silicon Valley Bank (SVB) and Signature Bank. In May 2023, First Republic Bank was seized.

“The recent banking stress amplified the outflow of deposits from the banking system, causing total deposits to decline for the fourth consecutive quarter and at a faster rate than in prior quarters,” FDIC chairman Martin Gruenberg said.

In a briefing on May 31, Gruenberg hinted that the U.S. banking system was teetering on the edge. He acknowledged that the massive federal bailout of SVB might have saved depositors but did nothing to stop the bleeding of the industry.

“The banking industry continues to face significant downside risks from the effects of inflation, rising market interest rates, slower economic growth, and geopolitical uncertainty,” Gruenberg said.

Rodan noted that the warning signs include banks “becoming increasingly wary of approving loans because of the prospect of default; real estate, particularly commercial, hurting badly by the emerging recession; and a weak demand for office space amid the economic downturn on the Biden administration’s watch.

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