NASHVILLE, Tenn. (WTVF) — The words "bank failure" are two we haven't really heard much of since the Great Recession of 2008.
Yet in the last three days, two banks in the U.S. have failed.
But Nashville financial experts say while the failures have sparked fears among people with money in the bank, the average accountholder doesn't need to worry.
Carson Odom with the David Adams Wealth Group is looking into the recent failures of niche banks like Silicon Valley Bank in California — a bank that has mainly tech startups as its customers.
Odom says as interest rates have risen, it's been harder for tech startups to get funding, meaning they're relying on their own bank accounts for cash. But with that money tied up in loans the bank gave out previously, the bank didn't have enough cash to give back to those tech startups, as even more started demanding their money back too.
It's a problem he relates to a shortage we are more familiar with from just a few years ago: toilet paper.
"Just like the toilet paper shortage in 2020, there wasn't a need for everyone to buy toilet paper, but when fear takes over on social media or in the news, everybody thinks they need to get it while they can," Odom said.
But the good news, Odom says, is these bank failures likely aren't a sign of a larger problem that will impact an average person with bank accounts.
Odom says that's because most people don't do business with specialty banks like Silicon Valley, catering to a specialized industry.
Also, the Federal Deposit Insurance Corporation, FDIC, insures bank accounts up to $250,000 each.
Odom says had account holders in Silicon Valley not given into the fear, the domino effect leading to its failure likely wouldn't have happened.
