Is Your Bank Safe?

With all the commotion around the SVB demise and rebirth, and the condition of the other small regional banks, we thought we’d offer some comments on bank condition and what to look for:

  1. If you’re banking with one of the money center banks, your money is probably quite safe. None of them appears to be in any financial trouble, and although they might book some losses on the sale of their bond portfolio, they’ll probably hold all of their securities to maturity, avoiding the problem.
  2. If you’re banking with one of the regional banks that have had problems recently, there are things you can do to look at their condition…if they’re public, check the 10Q statement each quarter, which they’re required to file. As a general rule, give your bank the sensibility test: are they doing things that you find sensible? For example, SVB leased 160,000 square feet in a lake waterfront compound, which strikes me as not too sensible, unless they were planning to move major headquarters out of California, which is possible.
  3. Don’t put any balances in any one bank over the federally insured maximum, which is $250,000. Most of my clients don’t have this problem (their balances are $25-50k). Go find another bank or hold interest bearing CD’s or even corporate preferred stocks, which have an 85% tax exemption (or did), but which might have interest rate risk if the Feds don’t get their act together. You can also find high yielding dividend stocks, too. Check with your financial advisor. There are restrictions on what kinds of securities you can hold outside of your corporate IRA.
  4. Speaking of your corporate IRA, make sure that your investment advisor isn’t invested in ESG or DEI loving companies, because he/she might be costing you returns on your investment. Wharton and the University of Chicago reportedly have done recent studies on the different types of returns, and ESG/DEI returns were lower.
  5. People have done studies on which companies embrace ESG/DEI; Wayne Allen Root is one. He’s a little nutty, but he does good work.

So, all of these things should keep you busy this week.