Their View: Bank collapse doesn’t mean system is failing

First Republic Bank is no more, as the wobbling 14th largest U.S. bank was seized by the Federal Deposit Insurance Corp. and mostly resold at auction.

Depositors will all retain their funds, with the big losers being the shareholders. It’s good that those who were simply parking their personal or business funds in the bank won’t face a catastrophic loss.

While the reality of three large banks collapsing spectacularly in the span of two months — Silicon Valley Bank followed closely by Signature Bank in March, and First Republic now — may set off alarm bells for consumers and investors worried about the health of the banking system, it seems like this could have been the end of the collateral damage.

First Republic had been teetering on the edge for a while, to the point that the Treasury engineered a $30 billion cash infusion from a consortium of large banks in order to backstop it, though that ended up not being enough as larger, uninsured depositors pulled out their funds.

The bank is of a type uniquely vulnerable to this type of bank run: boutique financial institutions in high-income communities catering to wealthy individuals and businesses where the bulk of deposits are in accounts exceeding the $250,000 FDIC insurance cap. There’s no reason the contagion will now spread uncontrollably, though of course there have been whispers of a broader recession for over a year now. The thing about a recession is that it is to some extent a self-reinforcing prophecy, which means the best thing for everyone to do now is not panic.

This piece originated with the Editorial Board of the New York Daily News.