The first five months of 2023 saw the failure of three major U.S. banks. What are the chances a Texas-based bank could meet a similar fate?
"I don't know that I would tie it specifically to the geography,"said."I think it's more of just a balance sheet management case study. I think banks in Texas are just as fortunate as anyone who lives in Texas to call the state home. We benefit from, in my view, the most robust economy in the U.S."
When banks failed in the 1980s, or in the Great Recession of 2008-09, the problems were more systemic. This time around, the collapses are expected to be more isolated,That's because When a person deposits money in a bank, the bank has to put it somewhere. Johnson said that somewhere is often 30-year bonds, but with the way the Federal Reserve has increased interest rates, those investments don't always pay off.
"If you bought bonds that at the time were paying 3%, which was a great deal, and all of a sudden the Fed's been jacking up interest rates for a year, 3% bonds are not very attractive anymore. Nobody wants to buy them," Johnson said."So, your investment, Mr. Bank, that you paid $100,000 for, getting 3% -- if you want to sell them, you might have to sell it for $50,000.""They had a run on the bank," he said."Everybody wanted their money at once.
The CEO of San Antonio-based Frost Bank, Phil Green, said to continue to build the Texas economy, clients should be confident in their bankers. "You can't build a bank on scared money. And Texas wasn't built on scared money," he said."And there's a wholesomeness of people coming together and trusting bankers who have sound judgment to put these things together, put their money together with others, and make these economies grow. I think Texas is comfortable with that. I think we've got a raft of small community banks that believe in that and help with that. I think that's somewhat unique about Texas.
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