William Isaac, a former chairman of the Federal Deposit Insurance Corporation (FDIC), stated on Wednesday that he believes there will likely be more bank failures in the United States and stressed the importance of the government getting its act together.
During an appearance on Neil Cavuto’s show on Fox News, Isaac said, “There will probably be more failures along the way. The problem we have is the same one that we had back in the 1970s when the government was out of control with its fiscal policies, its monetary policies, inflation set in and banks were just not ready for that,” said Isaac.
“The thrifts were not, either. We wound up losing some 5,000 banks during that period. We won’t lose anywhere near that number this time because we don’t have that many. We lost so many. We only have about 4,500 banks today,” he added.
Former FDIC Chairman William Isaac to Neil: The government has had irresponsible fiscal policies for 20 years pic.twitter.com/suJrM7I1fH
— Neil Cavuto (@TeamCavuto) March 15, 2023
Isaac expressed that he is not highly worried about contagion and trusts that the government knows what it is doing. However, he cautioned that there will probably be more failures, stating, “I don’t think this is the last failure. I think we’ve got some cleaning up to do.”
Over the weekend, SVB suffered a collapse due to a disclosed $1.8 billion loss on asset sales caused by high-interest rates, resulting in a plummet in its stock price, a bank run by its customers and a regulatory shutdown of its operations. Another bank, Signature Bank, also faced a shutdown on Sunday. SVB had an estimated asset value of around $209 billion at the time of failure, making it the second-largest bank failure in US history.
Following the collapse of SVB, many banks experienced significant declines in their stock values on the following Monday, with institutions such as Credit Suisse and First Republic being affected.
There is concern that investors and bank customers may begin to withdraw their support from other banks that are perceived to be the next vulnerable targets. This has prompted some to warn that a second major crash could be on the horizon.