By Michael Snyder

What in the world was she thinking? When a bailout was hastily arranged for uninsured depositors at Silicon Valley Bank and Signature Bank, the implication was that the same thing would be done for uninsured depositors at any other banks that failed. But now U.S. Treasury Secretary Janet Yellen is telling us that is not actually what will happen. She just admitted that depositors at a failed bank will only be protected if officials determine that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences”. So that means that depositors at big banks are likely to be protected and that depositors at small banks are much less likely to be protected. In other words, Janet Yellen just poured lighter fluid on every small bank in America.

Why would anyone keep more than $250,000 in a small bank at this point when there is a very real risk of losing all of the uninsured money if the bank suddenly fails?

Wealthy people are not stupid. They are going to move billions of dollars from small banks to large banks in the days ahead, and that is going to cause a tsunami of stress on those small banks.

Does Janet Yellen even understand what she just did?

During congressional testimony on Friday, Senator James Lankford asked Yellen the sort of question that many of us have been hoping that someone would ask…

Republican Sen. James Lankford of Oklahoma pressed Yellen about how widely the uninsured deposit backstops will apply across the banking industry.

“Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now?” asked Lankford. “Will they get the same treatment that SVB just got, or Signature Bank just got?”

Incredibly, Yellen came right out and admitted that uninsured deposits will only be protected under certain circumstances…

Yellen acknowledged they would not.

Uninsured deposits, she said, would only be covered in the event that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

If your bank fails in the days ahead, bureaucrats in Washington will get together and take a vote to determine if the uninsured depositors at your bank are important enough to protect or not.

Needless to say, that means that wealthy individuals with very large balances at very small banks are at great risk.

Senator Lankford clearly understood that Yellen and her fellow bureaucrats have now created a two-tier banking system…

“I’m concerned you’re … encouraging anyone who has a large deposit at a community bank to say, ‘we’re not going to make you whole, but if you go to one of our preferred banks, we will make you whole.’”

If you have not seen the exchange between Lankford and Yellen yet, you can view it here…

https://twitter.com/SeidlerCorp/status/1636518949872451584

We are in so much trouble.

Prior to Yellen’s testimony, banks were already being forced to rely on the discount window at the fastest pace that we have ever seen…

Data published by the Fed showed $152.85 billion in borrowing from the discount window — the traditional liquidity backstop for banks — in the week ended March 15, a record high, up from $4.58 billion the previous week. The prior all-time high was $111 billion reached during the 2008 financial crisis.

The data also showed $11.9 billion in borrowing from the Fed’s new emergency backstop known as the Bank Term Funding Program, which was launched Sunday.

But now this stampede threatens to evolve into an avalanche.

There are more than 4,000 banks in the United States right now, but if our leaders are determined to only protect the biggest institutions we could ultimately see hundreds of them fail.

Unless something changes, I cannot recommend keeping more than $250,000 in any small or mid-size bank.

Of course the vast majority of us do not have to worry about such things, but those that do have lots of money are paying very close attention to what is happening.

In fact, on Friday investors once again pulled lots and lots of money out of banking stocks…

Stocks fell Friday as investors pulled back from positions in First Republic and other bank shares amid lingering concerns over the state of the U.S. banking sector.

The Dow Jones Industrial Average lost 384.57 points, or 1.19%, to close at 31,861.98 points. The S&P 500 slid 1.1% to end at 3,916.64 points, while the Nasdaq Composite was down 0.74% to 11,630.51 points.

First Republic slid around 33% to end the week down nearly 72%.

I had hoped that the banking panic would settle down a little bit after the emergency measures that were instituted.

But now there is a great risk that the panic could escalate significantly.

Many are warning that this crisis could eventually grow to be even worse than the last financial crisis. For example, Dave Kranzler believes that what we are facing “will be 2008 x five unless the Fed and the other big Central Banks print enough money to monetize the fraud in the banking system”…

I believe what is starting to unfold will be 2008 x five unless the Fed and the other big Central Banks print enough money to monetize the fraud in the banking system. But if the Fed takes that kind of action, the dollar will likely collapse. It may take bigger blow-ups for the Fed to act. In which case, I am confident that Blackrock (BLK), Citigroup (C) and Goldman Sachs (GS), among several others, are at risk.

You may not have any sympathy for the banks.

But a healthy banking system is absolutely critical for our economy as a whole.

For a moment, just imagine what our system would look like if nobody could get a mortgage, an auto loan or a credit card.

Relatively few people pay with cash or checks these days, and that is especially true for major purchases.

If banks start failing, the flow of credit will start drying up, and we will plunge into a full-blown economic nightmare.

So you better hope that our leaders can find a way to prop up our rapidly failing system.

Because economic conditions are already bad enough. In fact, earlier today we learned that leading economic indicators have now fallen for 11 months in a row.

We are already in the midst of a substantial economic downturn, but if banks start collapsing left and right we will soon find ourselves in an economic horror show.

So I don’t know why Janet Yellen did what she just did.

It is madness.

She just put a target on every single small bank in America, and so now uninsured deposits will likely get pulled out of those banks at a rate that is absolutely breathtaking.

And the rich get richer!

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About the Author: My name is Michael and my brand new book entitled “End Times” is now available on Amazon.com. In addition to my new book I have written six other books that are available on Amazon.com including “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. (#CommissionsEarned) When you purchase any of these books you help to support the work that I am doing, and one way that you can really help is by sending copies as gifts to family and friends. Time is short, and I need help getting these warnings into the hands of as many people as possible. I have published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is definitely a great help. These are such troubled times, and people need hope.