Regional banks have a romaine lettuce problem

Plus: Tesla vs. Ford, China's coal conundrum and more. Bloomberg This is Bloomberg Opinion Today, a nightmarish merry-go-round of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - What’s up with [banks](? - What’s up with [autos](? - What’s up with [coal](? The Wests Go South Let’s talk about food recalls, by which I mean the banking crisis. (Everything is about the banking crisis nowadays, even [exploding manhole covers](.) The FDA and the USDA routinely issue warnings about foods containing things like undeclared allergens or salmonella strains. But every now and then, a viral outbreak infiltrates our social feeds and takes over our lives. Remember the Peanut Butter [Pause]( of 2022? Or the Great Romaine [Recall]( of 2018? Or the Chipotle E. Coli [Closures]( of 2015? These are behavior-changing events. Nobody wants to be hospitalized with life-threatening diarrhea! So you throw out your peanut butter and steer clear of fast-casual salads and fajitas for a while. Better safe than sorry, you think to yourself, even if the origin of the food recall is thousands of miles away. The knock-on effects here can be powerful. During the romaine recall, for example, the price for other types of lettuce [went soaring](. Some people may have even written off romaine for the rest of their lives. The logic of “better safe than sorry” is so strong that it can destroy whole varieties of lettuce — or, as the case may be, banks. Under normal circumstances, when you Google the name of your financial institution, the first link belongs to the bank: bankofamerica.com or chase.com, for example. But what if you Google the name of your bank and are greeted with a scary picture of a frantic man on the trading floor and headlines with phrases like “regional banks fall” and “shares plunge”? You are going to freak, right? As if on cue, almost half of Americans [are now worried]( that their bank deposits aren’t safe. And as you freak out, you’ll think to yourself, better safe than sorry as you yank all of your precious deposits out of Western-Whatever-Bank and transfer them into a Boring Big Bank that is not in a crisis. This may not be rational — you might also want to Google “FDIC” — but it is exactly what’s happening with [PacWest]( and [Western Alliance](, both of which plunged by more than 60% today: Matt Levine says [part of reason these smaller banks are struggling]( is that relationship businesses are fickle little things in this age of information. “If your bank has huge mark-to-market losses, you are more likely to hear about it. And if you are worried about the solvency of your bank, you can tweet or Whatsapp or group-text about it, and worries can spread faster, and you can withdraw your money via an app,” he writes. Whether your bank is actually a safe and sound place to store your money is almost beside the point: They are in a PR crisis, and by extension, so are your hard-earned finances. PacWest is one such instance of this. On paper, it looks like a fine place to park some cash, as Paul Davies surmised [in a tweet]( this morning: There’s nothing about PacWest’s balance sheet that looks even slightly sketchy. There’s no big, bad group of uninsured depositors. And it’s got cash. Liquidity sources. All that jazz. It looks nothing like Silicon Valley Bank or First Republic … and yet! It’s now falling, Alice-in-Wonderland style, into a financial death pit. “The problem is all about profitability and whether banks can adapt,” Paul said later in the afternoon, arguing that these regional lenders are increasingly “[at risk of falling into a vicious spiral](” in which “falling share prices make depositors more skittish, funding costs rise further, profitability worsens and around it goes again.” It’s a nightmarish merry-go-round of money that makes our romaine retreat look like child’s play. Let’s just hope that we’re able to hop off before it’s too late. Bonus Bank Reading: - Some smaller banks are bringing back [free toasters](. — Stephen Mihm - Has [Silicon Valley]( lost its luster? Let the VC data decide. — Justin Fox Telltale Charts The pandemic was a money-maker for Big Auto: “Ford and General Motors earned more in the past two years than the prior four,” Liam Denning writes. But that good fortune — if you want to call it that — is coming to an end as sales and inventory come back to normal-ish levels. Both Ford and Tesla are exercising caution by trimming their prices, which Liam says [will create tighter margins across the board](. In what has to be a bad sign for the planet, aluminum smelters across China are essentially sending a mass email with the subject line “URGENT: ORDER MORE COAL PLS.” Asia was really hoping that it would be able to survive the summer without burning boatloads of coal. But as David Fickling writes, the Yangtze River — the lifeblood of many hydroelectric dams — is in a serious drought, which means that [China is going to need to fire up its coal plants]( in order to fuel “the thrum of a billion air conditioners.” The situation is similar in India, and it’s only going to get worse as climate change continues to bake the planet. Further Reading Stop the pandering. Voters want [a compromise]( on abortion . — Bloomberg’s editorial board You’d be a fool to want to [list your company]( in the UK. — Merryn Somerset Webb The SEC’s new [hedge fund rule]( is majorly flawed. — Aaron Brown [Small-dollar donations]( are strengthening our democracy. — Jonathan Bernstein The “tight” labor market is sometimes [an optical illusion](. — Claudia Sahm Latin America’s [treasure trove of lithium]( is giving me déjà vu. — Eduardo Porter The UK’s property market is better without [a Help to Buy program](. — Matthew Brooker ICYMI [Four Proud Boys]( were convicted of sedition. Tyre Nichols died from [police beating](. Marijuana can increase [schizophrenia](. Peter Theil says [Florida]( is too expensive. A jury said [Ed Sheeran]( didn’t steal that song. Kickers Please stop saying “[BoyMom](.” Some people have never seen [Star Wars](. We’re running out of [research monkeys](. The Taylor Swift [dating rumors]( have begun. Dutch nuns are desperate [to sell wine](. New Jersey has [mysterious pasta]( piles: Notes: Please send piles of pasta and feedback to Jessica Karl at jkarl9@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Follow Us You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](