A U of I professor explains what recent bank closings mean for Illinois residents | Main stories

CHAMPAIGN, Ill. (WAND) — Two recent bank failures have many wondering if a 2008-like recession is on the way.

WAND News spoke with University of Illinois economics professor Shihan Xie to learn more about the current economic situation.

“Now try not to take too much risk by investing a lot in high-risk areas like cryptocurrency or the stock market,” Professor Xie said.

Based in New York The bank signed collapsed after just two days Silicon Valley Bank.

The large number of tech startups with accounts at SVB means most accounts had more than $250,000 in deposits. The FDIC only insures up to $250,000 per account. The lack of diversification made the bank vulnerable to inflation. Signature Bank had similar problems after it focused on digital assets and cryptography.

“They do not have enough cash and stocks to cover the amount of depositors who have deposits in their banks. Their clients are startup companies. Not ordinary households like you and me,” Xie explained.

President Biden assured customers that their money was safe. The FDIC, the Federal Reserve, and the Treasury Department guaranteed deposits at both banks. President Biden also said that taxpayers would not be affected by the intervention of the federal states.

“There is no loss, and this is an important point. There will be no loss to the taxpayers,” President Joe Biden said.

Professor Hsieh says this collapse does not directly affect Illinois. Compared to the closing of Washington Mutual in 2008, it will not have the same effect.

“In terms of scale, this is a much smaller crisis compared to 2008,” Xie said. “The bankruptcy of Lehman Brothers, which is a much larger bank.”

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