BRENTWOOD, Tenn. (WTVF) — The failures of two U.S. banks are sparking concern.
NewsChannel 5 talked to a financial advisor about how to best protect your hard-earned cash.
Andrew Winnett of Legacy Builders Wealth Management says some don't realize that when you create an account at a bank, you allow the bank to use a percentage of your deposits as loans to other bank customers.
"Which means if something happens to the $0.10 or people want that money back or they have some bad loans — it's very volatile and banks can topple over," said Andrew Winnett.
Both the Justice Department and SEC are reportedly starting probes into Silicon Valley Bank, which collapsed on Friday. Apparently, former CEO Greg Becker sold more than $3 million worth of his shares in the company about two weeks before his house of cards fell. The transaction was scheduled a month in advance and doesn't necessarily suggest wrongdoing, but it is definitely raising some eyebrows.
While most Americans' money is protected by the FDIC, Winnett says it's a good time to take precautions. People with more than $250,000 dollars in the bank, which is the amount the FDIC insures, should definitely consider spreading out their money, or hybrid CDs.
"There's nothing you can do to buy more insurance. You just have to spread out your money to keep it under the $250,000," Winnett said. "Hybrid CDs are invested in institutions that are 10 times as safe. They're invested into insurance institutions that are required to keep excess solvency ratios because of state and federal regulations."
Winnett says bigger banks aren't always better.
"I like the idea of spreading out your money into smaller, regional banks that are fiscally responsible and managed well," he said.
Ultimately, it's your decision where you bank.
If your bank fails, your funds will likely transfer to another federally insured bank.
