Taxpayers Now Bailing Out The Rich Too?

Is today’s banking crisis primarily due to institutions’ over-reliance on wealthy customers as interest rates soar … after the 2008 financial meltdown was triggered by an over-reliance on their sub-prime loans to the poor?

At least, that’s the premise suggested in the WSJ’s “Welcome to the Superprime Banking Crisis,” in which we’re told “rising [interest] rates have exposed the problem with [banks] building a strategy around serving wealthy clients.” In short, while the rich aren’t defaulting on loans in droves ala the poor in 2008, they have been taking advantage of the Fed’s rapid interest rate inflation by taking their excess cash (deposits) to higher yields in online banks, money funds & Treasuries.” Ergo, bye-bye SVB, Signature, Republic, Credit Suisse.

Indeed. As the story goes: “When depositors began to panic about bank safety this month & withdrew their money, the most exposed were the people with uninsured deposits over the $250K FDIC limit. Uninsured deposits [for instance] represented a large share of deposits as SVB, which had encouraged clients to keep the majority of their cash at the bank. Rich customers came for the perks – then left with their cash.” But, what’s also suggested is that the Fed & Treasury Sec Yellen’s rushing to bail out these institutions & essentially guaranteeing the rich their ill-placed money won’t be lost after all, are using everyman’s aka taxpayers’ money to do so.

Davd Soul