Retirement Quick Tips with Ashley Ashley Micciche

This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It
Yesterday I talked about the most important way…
Brokered CDs - spread out coverage among financial institutions within one account. For businesses, they can do basically the same thing with what’s known as Certificate of Deposit Account Registry Service
Treasuries - backed by the full faith and credit of the US government without the much smaller FDIC insurance limits
Money Markets - variety of institutions to spread out the risk even though they’re not FDIC backed
Stash Your Cash with the Biggest Banks - Too Big To Fail & more diversified (remember SVB was a niche bank catering to venture capital and tech startups, so they were doomed as soon as the perfect storm hit of deposits and new capital flows drying up because their customers VC businesses were also drying up, and interest rates started rising which created huge losses for them as they sold bonds to cover withdrawals from the bank)
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It
Today, I’m talking about how to protect yourself against bank failures.
The most obvious way to protect yourself against bank failures, is to make sure your cash & savings account holdings at the bank are fully covered by FDIC insurance.
The problem is that if you have a lot of cash that exceeds the FDIC coverage limits, you could leave yourself exposed, and if your cash far exceeds FDIC coverage limits, it could be too cumbersome to spread your money around enough to maintain full coverage amounts with different banks, so people just don’t do that, especially with the 2008 financial crisis getting dimmer and dimmer. Up until early March, most people and almost certainly the depositors at SVB, many with millions of dollars sitting exposed and unprotected by FDIC, never considered that they might lose their deposits. But how quickly things change, so let’s break down the FDIC coverage limits so you can protect yourself 
The standard FDIC insurance amount is $250,000 per depositor, per insured bank. So if you’re married and have a Joint bank account, your assets there are insured up to $500,000. Anything under that amount is fully insured. Any cash or savings with that institution above that amount are uninsured. 
There are some other nuanced rules for other types of accounts and entities, like trust accounts, but applying the general rule of $250,000 in coverage per depositor per bank is going to be applicable in most cases. 
So if you have a lot of cash or savings with your bank in excess of this amount, the prudent thing to do is to spread your deposits among enough banks to always maintain the coverage limits. 
[Note - you don’t have to do this with all of your investments, keeping $250k at all financial institutions - doesn’t apply to investments, since those assets aren’t on the balance sheet of the financial institution. SIPC protections & additional insurance which will most often be fully insured and protected, and risk of investment itself]. 
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    
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>>> Visit the podcast page: https://truenorthra.com/podcast/ 
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It
 
There was a good opinion piece by the editorial board at the WSJ last week after the bailout of Silicon Valley Bank was announced:
“For the second time in 15 years (excluding the brief Covid-caused panic), regulators will have encouraged a credit mania, and then failed to foresee the financial panic when the easy money stopped. Democrats and the press corps may try to pin the problem on bankers or the Trump Administration, but these are political diversions.
You can’t run the most reckless monetary and fiscal experiment in history without the bill eventually coming due. The first invoice arrived as inflation. The second has come as a financial panic, with economic damage that may not end with Silicon Valley Bank”
It certainly is frustrating to see that the risks for Silicon Valley Bank were in plain sight but regulators didn’t do anything about it. 
Thankfully in the short-term, I don’t think this will look like 2008, and the result of all of this will not be the total financial collapse and contagion spreading, but just more costly and ineffective regulations on banks that in the end will only lead to higher costs and fees for the average American, while doing little to nothing to prevent the next bank run. 
So while it’s frustrating to know that this could have been prevented by better management at the bank and better oversight by regulators, the point I want to make in today’s podcast is that it’s scary and you might even be angry when something like this happens, but it doesn’t mean it's time to panic. 
NO doubt in the aftermath of the Silicon Valley Bank failure, people did panic. I know of one person who went down to their bank and pulled out several thousand dollars to put in their safe at home. This is an emotional and bad decision. The money is much safer at the bank then in your safe at home. 
Many investors also took this as a sign of just the beginning of a collapse and sold. Thankfully, it doesnt seem to have happened en masse since the stock market didn’t budge that much in the day following the regulators stepping in and taking over. You’ll hear this episode about a week after I record so it remains to be seen how much investors panic and sell.
The worst thing you could do…
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It
 
Today I’m talking about the problem with bank bailouts and moral hazard, and how stoping a contagion in the banking system today leads to more problems in the future because of moral hazard. 
 
On Sunday, March 12th, regulators announced that they would give depositors of Silicon Valley Bank access to their funds, not just those that were covered by FDIC insurance. This is important because roughly 97% of all deposits at SVB were not covered by the FDIC insurance limit, and the millions of dollars that some depositors had a SVB would have been reduced to $250,000 overnight. 
 
Since regulators stepped in to back all deposits, the next question is:Are all uninsured deposits now covered by government guarantees?
 
No. The regulators said they were making an exception for SVB and Signature (which also collapsed at the same time as SVB). 
If you recall from September 2008, it was the government’s refusal to bailout Lehman Bros after their collapse, that is widely accepted as the tipping point of the Global Financial Crisis. But 6 months prior to that, Bear Stearns collapsed and was bailed out. 
So its likely that Lehman, AIG, and other troubled banks with garbage balance sheets assumed that they could be bailed out too. And if they made that assumption, they would have been slow to act. It’s possible that Lehman could have found a buyer as things started to head south to prevent a bankruptcy. And they certainly would have taken on less risk with their CredDefSwaps and other risky investments if they didn’t have the backstop of the government. 
This played out the same way for SVB. By the time SVB tried raising capital to keep things afloat, it was too little too late, and it was too far gone. 
When the regulators step in it’s controversial, because it creates what is known as a “moral hazard”. It’s like the parents who will always bail their kids out no matter what. When the kids know this, they feel untouchable and certain kids will take advantage of the situation by doing crazy and stupid stuff and feel invincible all the while. Well as you and I both know, that behavior, if it continues will catch up to you someday with often catastrophic consequences.  
That’s moral hazard, and the same is true for banks if the government will always backstop them in a crisis. They and their customers have no incentive to manage their risk or act prudently, because Daddy Government will always step in and save the day. That poor incentive structure and the risky behavior encourages is scary when the US Financial system is put to the test as a result. 
Banks and regulators should have learned more from the 2008 financial crisis, but SVB is proving that’s not always the case. Especially in the banking world, where it seems like the management made poor decisions and mistakes. These mistakes were in plain view of regulators months ago when they started racking up the losses, but nothing was done about it, and here we are today. 
So when you once again have regulators stepping in to backstop all deposits, unfortunately no one learns from their mistakes and we can expect more of the same in the future. 
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It
Today I’m talking about what happened with Silicon Valley Bank.
Customer base: SVB catered to venture capital, tech startups, and even crypto, all of which have pretty much dried up in the last year, so when customers started taking their money out, there was no fresh capital coming in to offset withdrawals, they were forced to start selling assets to raise the funds to satisfy customer withdrawals. And this is the problem. Silicon Valley Bank had tied up a lot of their assets in treasuries that didn’t mature for several years. After the Fed started aggressively raising rates last year, those treasury bonds on their books started to rack up massive losses - $17 billion by the end of 2022. Then, once they have to sell those treasuries to pay out customer withdrawal requests, the losses are realized, & now they forced to sell their treasury bonds at huge losses, and because of these massive losses, SVB tried to raise additional capital from investors, which they were unable to do.
Then in the 2nd week of March, bank customers started to get really spooked, and more customers because to withdraw their money, creating a death spiral continued to unravel rapidly until collapse and the FDIC had to step in to shut the bank down on Friday, March 10.
https://www.wsj.com/articles/silicon-valley-bank-svb-financial-what-is-happening-299e9b65?mod=markets_major_pos2 
Even though SVB is in a niche market that made it especially exposed to this type of situation, the contagion spread to other banks with stocks of several other regional banks tanking in the aftermath. 
As of this recording, it’s uncertain how far the contagion will spread, but it seems unlikely to spread far at this point, because on Sunday, March 12th, “Regulators including the Federal Reserve, the Federal Deposit Insurance Corp. and the Treasury Department said the depositors of SVB, which failed last week, would have full access to their money starting Monday. They also said they would protect all the depositors of another bank, Signature Bank, that was forced to close on Sunday.” - https://www.wsj.com/articles/were-banks-just-bailed-out-by-the-government-6b0a582f?mod=markets_major_pos2 
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    
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>>> Subscribe on Apple Podcasts: https://apple.co/2DI2LSP
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>>> Visit the podcast page: https://truenorthra.com/podcast/ 
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

Welcome to a new week here on the Retirement Quick Tips podcast! I’m your host Ashley Micciche, co-owner of True North Retirement Advisors, an independent financial advisory practice managing $340 million in client assets. I’m a Chartered Retirement Planning Counselor and I’m using my 15 years of experience as a financial advisor to help you gain clarity and make a plan for the retirement you envision.
On this podcast, I cover everything from investing, to retirement spending, to taxes in retirement in just a few minutes each day, so if you’re 5-10 years on either side of retirement, and looking for some daily doses of retirement planning wisdom, stick around this week as I talk about Why Banks Are Going Bust & What To Do About It
Now, I was actually going to talk about a completely different topic this week, but then Silicon Valley Bank failed as I was getting ready to record, I started getting client emails, and shivers down my spine as I recalled the experience of Bear Stearns and Lehman Bros going bust at the onset of the global financial crisis, and I thought I better switch gears to help you make sense of what’s happening with Silicon Valley Bank, one of the largest bank failures in US history. 
So this week, I’ll talk about what happened with Silicon Valley Bank, the implications for investors and the banking system as a whole, and most importantly what you can do to protect yourself. 
That’s it for today. Thanks for listening! Come on back tomorrow…where I’ll break down what led to the collapse at SVB. 
My name is Ashley Micciche...and this is the Retirement Quick Tips podcast.
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>>> Subscribe on Apple Podcasts: https://apple.co/2DI2LSP
 
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>>> Visit the podcast page: https://truenorthra.com/podcast/ 
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance