With more than 4,000 banks in the United States, you might wonder whether the problems of three mid-size banks don't amount to a hill of beans in this crazy world. The potential for contagion clearly does: San Francisco–based First Republic Bank — which has a branch at the corner of State and Anapamu in Santa Barbara — got a total of $30 billion in deposits on Thursday from the Big Four banks and others like Goldman Sachs and Morgan Stanley, and that was after $70 billion in loans was promised on Sunday from the Federal Reserve and JPMorgan Chase. That $100 billion worth of beans was not only to shore up that bank but public confidence in banks in general.
The events in the current banking debacle mount daily, but in brief, a run on Silicon Valley Bank last week brought to very public attention a fatal weakness among several tech-oriented banks. Silicon and Silvergate Bank of La Jolla voluntarily closed that Friday. Signature Bank, headquartered on New York City's Fifth Avenue, closed on Sunday. All three held crypto or served crypto companies, and when those funds tanked last year, the banks did a slow walk off a short plank.
"Crypto?" said Peter Rupert, a UC Santa Barbara economist and director of the Economic Forecast Project. "I can see having it if a bank is super well-diversified — it's super risky, super volatile. What you're holding could go up 20 percent one week and down 40 percent the next."