94 US Banks Burdened by Uninsured Deposits – Risk of Bank Runs

A new study by Florida Atlantic University believes that 94 separate US banks are facing a significant risk of bank runs. The at risk banks have all reported a 50% or higher ratio of uninsured deposits to total deposits. Basically, they simply do not have the hard currency to shell out in the event of a panic.

Banks currently limit cash withdrawals under the pretense of money laundering and security. They will ask all sorts of questions if you even TRY to withdraw your money. They realize we are on the verge of a crisis in banking on a global scale.

The University’s Liquidity Risk from Exposures to Uninsured Deposits index found that BNY Mellon and John Deere Financial have a 100% ratio of uninsured deposits, followed by State Street Bank (92.6%), Northern Trust (73.9%), Citibank (72.5%), HSBC Bank (69.8%), JP Morgan Chase (51.7%), and U.S. Bank (50.4%).

The Federal Deposit Insurance Corporation (FDIC) has the power to shutdown a bank before a bank run occurs. The FDIC is controlled by Congress and acts as a safety measure to protect insured deposits in the event of bank runs. Deposits over $250,000 are not insured nor are mutual funds, annuities, life insurance, bonds, or stocks. Uninsured depositors have experienced a mere 6% in losses over the past 16 years.

Let’s take a look at the Silicon Valley Bank (SVB) failure of March 2023. The FDIC agreed to make all account holders whole including those with uninsured deposits. SVB has an uninsured deposit ratio of 97% at the time and failing to cover all losses would have created a panic in the banking world.  The FDIC invoked the “Systemic Risk Exception” for SVB and Signature Bank that enabled them to protect uninsured depositors when deemed necessary. Two-thirds of the FDIC board voted in favor of the measure and the Fed, Treasury Secretary, and president signed it off.

The FDIC relies on the Deposit Insurance Fund (DIF), which is backed by Washington. Now, what happens when multiple large banks fail? It was easy for the government to write off a few banks to brush the severity of the situation under the rug. If everyone tried to withdraw their accounts at the same time, the government would not have the hard currency to back it. This is one of the major reasons that we will see a conversion from hard currency to digital.

I have stressed that studies in ancient times as well as modern show that during a crisis you head toward DEFLATION as money becomes scarce, the VELOCITY of money collapses, and people HOARD wealth – they do not spend it. The US will experience a period of stagflation as GDP will decline as inflation soars. Banks will begin to fail in Europe before it becomes a global contagion.