When depositors ask for their money back, there is not enough money to pay everyone back.”
Lumsdaine sees the current banking and broader global economic climate—stable as both are, in her view—as ripe for lessons learned, be it from the standpoint of strategic communications or risk management.
“In some ways, it just energizes our discussion to be able to bring real-world examples into the classroom,” Lumsdaine said, recalling an exercise just last fall in which she assigned her international finance students a multi-national corporation and country, for which they were responsible for evaluating currency risk amid rising interest rates.
But even as the coming months will surely bring continued scrutiny for both SVB’s executives and the regulators tasked with overseeing the bank, Lumsdaine’s most pressing questions may well surround the depositors moved by anxiety to withdraw large portions of their multi-million-dollar deposits all at once. Had customers had only withdrawn, say, what they needed to make payroll, she explained, the situation at SVB might have unfolded differently.
It’s a phenomenon (in which fear begets fear) analogized not just with George Bailey’s Capra-imagined plight but also, Lumsdaine points out, by early-pandemic product hoarding that left store shelves bare.
“If everybody just went into the store and bought one bottle of hand sanitizer, there would have been enough,” she said. “But instead, what you saw, was people buying 100, and there wasn’t enough for everybody. It’s the same with the deposits: if people withdraw what they need, the bank can withstand that.”
The FDIC insures deposits at most major US banks up to $250,000.