Can the Big Banks Survive Coronavirus? — Market Mad House

Many investors will ask can the big banks survive coronavirus, because of recent history.

Remember, the last time the financial system received a major shock (in 2007 and 2008 ) only federal action prevented a wave of big bank collapses. For example, the US treasury nationalized the mortgage banks Fannie Mae and Freddie Mac on 7 September 2008. Additionally, a major investment bank, Lehman Brothers, collapsed completely in September 2008.

In fact, the US Economy almost collapsed on September 17, 2008, after the bankruptcies of Lehman Brothers and the insurance Goliath AIG (NYSE: AIG). By 18 September 2008, the U.S. Federal Reserve was insuring money market accounts to prevent bank failures.

Finally, on 26 September 2008, a major consumer bank; Washington Mutual popularly known as WaMu, went bankrupt. To clarify, WaMu collapsed because depositors withdrew $16.7 billion in 10 days. Ultimately, they sold WaMu to JPMorgan Chase (NYSE: JPM) for just $1.9 billion.

Only the Federal Deposit Insurance Corporation (FDIC) saved banks by guaranteeing $1.3 trillion in loans to prevent collapse.

Can the Banking System Survive the Coronavirus?

Given that history, it is a good time to ask how safe and healthy are the banks? A good way to answer that question is to look at the finances of America’s largest bank; JPMorgan Chase & Co. (NYSE: JPM).