In the wake of Depression-era bank runs that caused thousands of financial institutions to fail, the government began doing something different in the 1930s—it created the FDIC and started insuring deposits. It was intended to make people feel confident in the banking system, and less likely to pull their money out.
But that deposit insurance only goes so far—up to $250,000 for each depositor, to be exact. So when Silicon Valley Bank and Signature Bank collapsed in March and sent ripple effects throughout the banking sector, many pointed to the banks’ swathes of uninsured deposits totalling in the millions and billions as one of the main factors behind the panic, along with the Federal Reserve’s interest rate hikes and depositor panic fueled by social media.
