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Many of us who lived through the financial crisis of 2008-2009 had flashbacks to that era. The collapse of Silicon Valley Bank and Signature Bank also raised concerns about the underlying health of bank balance sheets, particularly for the smaller firms.
We were reminded of how customer confidence is everything for depository institutions. Banks exist because depositors have faith their money is safe. Financial assumptions are made that only a fraction of them will want to withdraw cash at any one time. When that changes no bank, including JP Morgan Chase, can withstand everyone lining up at the teller window.
Some argue about moral hazard and the Fed rescuing mismanaged companies. But the drop regional bank stock prices took even with the full support of the Fed pointed to the potential damage the financial system would have suffered had there been anything short of a backstop...
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