As the Fed’s aggressive interest rate hikes have declined bank asset values, economists say there has been a stark increase in “the fragility of the U.S. banking system to uninsured depositor runs.” New study finds that 186 more banks could collapse:
A run on these banks could pose potential risk to even insured depositors — those with $250,000 or less in the bank — as the FDIC’s deposit insurance fund starts incurring losses, the economists wrote.
That’s because most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up demand and the price of the bond. The timing coincided with the financial difficulties many of the banks’ customers – largely tech start-ups – were dealing with, forcing them to withdraw their deposits.
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