Dan Ushman isn't sure where he'll end up stashing his company's money. But he's been thinking a lot about it these days.
The start-up founder recently moved savings out of failed Silicon Valley Bank, whose spectacular collapse this month set off tremors across the financial industry, and parked it in accounts at Bank of America and Chase while he contemplates what's next -- brokerage accounts, perhaps, or money market funds, Treasury-backed trusts or certificate of deposit accounts.
The goal, he says, is simple: to reduce risk while maximizing interest.
"Having SVB collapse out from under us gave us a lot of pause," said Ushman, 38, founder of a software firm in Chicago. "We're thinking hard about how to spread our cash around. We want higher yields and safety. But the thing about business savings is that they're savings until you need them, so we don't want to lock anything up long-term."
Across the country, millions of Americans are making similar calculations, trying to figure out how to best allocate their money after the implosion of two U.S. banks and the emergency takeover of European banking giant Credit Suisse last weekend, which set off fears of a global financial crisis.
The crisis so far doesn't seem to have come, and the U.S. government has taken great pains to reassure depositors that bank accounts are safe. But that hasn't stopped people from shifting their money around. Americans are moving hundreds of billions of dollars out of banks -- especially smaller, regional banks -- into larger institutions, as well as money market funds, government bonds, high-yield online savings accounts, even cryptocurrencies and gold.
In the two weeks since Silicon Valley's dramatic collapse, investments in money market funds, a type of mutual fund focused on low-risk securities, have ballooned by nearly $240 billion, according to the Investment Company Institute. Yields on two-year Treasury bonds have fallen 24% as a result of booming demand. Money market funds are not insured by the federal government the way bank accounts less than $250,000 are. But even riskier investments are thriving, too: Bitcoin prices have risen 40%, and gold is up about 10%.
Overall, an estimated $550 billion in deposits have moved from smaller and regional banks to large banks and money market funds in the past two weeks, according to an analysis by JPMorgan.
"Turmoil in the markets always puts money in motion," said Danielle Lucht, a financial adviser in Cape Coral, Fla., who is fielding twice as many calls from clients as she was a few weeks ago. "The big concern right now is: Is my money safe? How can I make it safer? People who have cash in simple savings accounts are using this as an opportunity to move their money."
About 12% of Americans say they have taken money out from the bank "because of the collapse of Silicon Valley Bank," and 18% say they are considering doing so, according to a Yahoo News/YouGov poll released Tuesday. Still, most of the respondents -- 55% -- said they were confident the banking system is safe.
The recent shift builds on a trend that began a year ago, when the Federal Reserve began raising interest rates after years of keeping them near zero. Suddenly regular bank accounts -- that pay very little, if any, interest -- became much less attractive than other investments offering higher returns.
That steady movement out of bank accounts took on a life of its own this month after fears of bank failures led customers at Silicon Valley and Signature Bank of New York to take out billions of dollars in cash in a matter of a few hours. The result was a bank run that triggered the collapse of both institutions.
The Fed and other regulators were quick to step in with emergency measures aimed at stemming similar runs at other banks. But panic persists: This week, shares of PacWest Bancorp, a regional California institution, tumbled 17% after it reported a 20% loss of deposits this year. Economists say that lack of confidence in a company's stock can be self-fulfilling if it prompts customers to remove their money, leaving the bank in even worse shape.
At First Republic, not even a $30 billion rescue package from the nation's biggest banks has been enough to keep people from taking out their money. In all, customers have withdrawn about $70 billion in recent weeks, or roughly 40% of the bank's deposits, the Wall Street Journal reported this week.
"People are looking around and saying, 'I really don't want to be uninsured,'" said Itamar Drechsler, a finance professor at the Wharton School at the University of Pennsylvania. "They're buying government bonds and going to bigger banks at the expense of regionals."
The federal government insures deposits of up to $250,000 in any given bank account, though there are looming questions about whether it will raise that cap or extend protection to all deposits as it did this month at Silicon Valley and Signature Bank. Treasury Secretary Janet Yellen struggled to manage the fallout from remarks Wednesday over the extent to which the federal government could insure deposits over the limit at other banks if they failed; markets fell after she spoke, and she later amended her written testimony to stress that the government has "tools we could use again" and would be "prepared to take additional action if warranted."
Still, the recent panic has been enough to spook those with large sums piled into traditional bank accounts. Brenton Wickam, 53, a commercial real estate investor in Silicon Valley, hadn't thought twice about keeping his personal savings in one bank account -- until recently.
When Silicon Valley collapsed, Wickam started getting a barrage of text messages all saying the same thing: "First Republic's next." That was particularly troubling to Wickam, who had been banking there for years.
Last week, he showed up at a local branch to begin moving his savings into new accounts, in $250,000 chunks so they'd be insured by the U.S. government. The leftover money he took to Wells Fargo, though he plans to invest it in money markets or Treasurys.
"I felt like the dumbest guy in the room, keeping all of my cash in one bank account," Wickam said. "I've been around awhile -- 2000, 2008, I've seen what a financial crisis looks like -- but I was just being lazy."
The exodus of deposits, particularly from smaller banks, is particularly worrisome because it is expected to have a chilling effect on how much those institutions are able to loan. Nearly 70% of commercial real estate loans, for example, come from small and midsize banks, Fed data shows.
"The consequence of this is manyfold," said Torsten Slok, chief economist at Apollo Global Management. "The reality is, banks finance themselves through deposits."
A drop in deposits, he said, means banks have less money on hand to make loans. If someone walked in looking for a $40,000 car loan, for example, and a bank didn't have much in deposits, it would have to borrow that money from wholesale markets, where interest rates have risen sharply in the past year. As a result, borrowers face higher interest rates and stricter standards, Slok said.
"If banks across the country suddenly say, 'We're going to tighten lending standards for anyone who would like to buy a car or a house or get a corporate loan' - if they stop lending money out, you could have a sudden stop in the economy," he said. "That begins to raise the risk of a recession."
Information for this article was contributed by Jeff Stein of The Washington Post.