(The Center Square) – With two major banks collapsing in other states, the Illinois Bankers Association is reassuring Illinoisans they are secured, and not by taxpayers.
Silicon Valley Bank in California and New York Signature Bank were both taken over by the Federal Deposit Insurance Corporation over the weekend. President Joe Biden announced Monday the Federal Deposit Insurance Corporation took the banks over and management there will be fired.
And while depositors will be secured through FDIC, bank investors won’t.
“They knowingly took a risk and when the risk didn’t pay off, investors lose their money,” Biden said. “That’s how capitalism works.”
Illinois Bankers Association Vice President of Government Relations Ben Jackson reiterated Biden’s insistence that taxpayers are not impacted by the FDIC support of depositors.
“The funds there to backstop Americans’ deposits are funded by banks so banks pay quarterly assessments based on a very specific formula,” Jackson told The Center Square.
He doesn’t expect there to be a cascade.
“These were banks that generally had clients that were in areas that pose some risks such as startups, cryptocurrencies, that type of thing, and they had situations where depositors pulled out and the banks didn’t necessarily have the liquidity,” Jackson said.
Illinois banks and thrifts are strong, Jackson insisted, and they are insulated from bank failures in other states. Anyone with concerns should reach out to their bankers, he said.
“A banker wants their customer to feel secure that their deposits are going to be insured and that they’re going to be available when they need them,” Jackson said.
Jackson said the reforms that were put in place since the housing and banking crisis 15 years ago have helped insulate banks from when other banks may collapse.
