After the closures of Silicon Valley Bank in California and Signature Bank in New York, some New Jersey residents are voicing concerns about the possibility of bank closures in the Garden State, and what that could mean for individual account holders.
According to Rutgers University economist James Hughes, for individuals with regular checking and savings accounts, there should not be a problem.
You should be fine
He said most banks in the Garden State are not facing the kinds of unique challenges SVB and Signature Bank suddenly encountered with their major clients, and FDIC insurance for individual accounts is now $250,000. Even if there was an internal issue, “unless you have all your money parked in one big account that exceeded the insurance limits you’re pretty much OK.”
He said the typical New Jersey resident with a checking and savings account in the typical bank does not have to worry about their situation.
NJ EDA offering emergency help
On Monday, President Biden said customers of the two closed banks will be able to access their funds, and Gov. Phil Murphy announced several New Jersey Economic Development Authority programs will provide emergency assistance to companies affected by Silicon Valley Bank.
Hughes said the circumstances surrounding the sudden problems engulfing SVB and Signature were tied to inflation, interest rate hikes, a pull-back of venture capital and sudden panic that spread online.
“It’s probably a wake-up call, that we really have to focus more on regulation and risk management,” he said.
Will the Fed keep raising interest rates?
Hughes said the Federal Reserve had been expected to raise interest rates another quarter to half a percent when they meet next week but now, after what has happened, “the Fed’s in a tough place, inflation refuses to die, we are in uncharted waters, which really means we don’t have a clue for the most part.”