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Banking Mini-Crisis

No bones about it — they are worried.

No, I’m not a banking expert, but I have studied disasters and crisis situations and how people and organizations respond to them. The banking failures at two banks that specialized in tech companies was very worrisome to the federal government in general and the Department of the Treasury and banking regulators in particular.

The extraordinary measure taken to quell concerns about bank deposits is the key indicator. Normally, the Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to $250,000. The decision was made to cover all the deposits at the two banks that had failed.

No, it is not quite like the federal bailout of major banks in 2008, but it sure smells like it! The difference is only that the FDIC will reach into its reserves to pay the losses to individuals and businesses. The fund is not federal monies, but money collected from banks who pay premiums to have FDIC-backed insurance. Those deposits are not limitless and additional bank failures will be problematic.

Which brings me to the thought that we as a “world” are living on the edge almost all the time. Be it energy, the supply chain, drug production, etc., our world is a fine-tuned instrument that does not have a lot of redundancy in it. When there is a glitch somewhere, e.g., baby formula, it reverberates through the economy and people’s lives.

As for this latest banking situation, it is not over yet.
Eric Holdeman is a contributing writer for Emergency Management magazine and is the former director of the King County, Wash., Office of Emergency Management.