Minnesota economist: Instability in regional banks ‘unlikely’ to come here

The failure of two regional banks, Silicon Valley Bank of California and Signature Bank of New York, has a similar feel to the banking crisis of 2008.

But Tyler Schipper, an economics professor at the University of St. Thomas, said it’s unlikely these banking troubles will filter to Minnesota or elsewhere in the country.

“With the president getting up there with the economic team, Janet Yellen being all over the news media, Jerome Powell being all over the news media, it does look a lot like 2008 even though it’s really different in some key ways,” Schipper said.

The biggest difference, Schipper said, is Silicon Valley Bank and Signature Bank are medium-sized institutions, unlike the big banks that failed 15 years ago. And the depositors in the two banks, which were taken over by federal regulators over the past three days, are mostly investors in start-up companies and not regular, small-sized depositors.

“The bank was doing what banks do,” Schipper said. “They take your deposits and they invest them in things, or they give out loans, and what was happening is that they were already under a little bit of pressure because their depositors were coming to pull money out as they were having a hard time making it in Silicon Valley right now.”

Schipper said the run made by depositors at both banks definitely moved quicker because of the convenience of modern technology.

“From ‘There’s trouble there’ to the bank is being taken over by the FDIC was a matter of, like, a day and a half, it felt like. It happened very quickly,” he said.