It's crystal clear now: More banks are going to fail

• It is likely that more bank failures are coming after the collapse of Silicon Valley Bank.
• Commentators, politicians, and the markets are all warning of more pain in store.

The dust is still settling following the collapse of Silicon Valley Bank, but there's one thing that's clear: more banks are probably going to fail.

SVB's operations were shuttered on Friday by state regulators, and Signature Bank was closed down shortly after. While market commentators say the failures don't mark a Lehman-style crisis, more bearish prognosticators say the risk of contagion across the banking industry remains high.

In an interview with Politico on Sunday, former Federal Deposit Insurance Corporation chairman William Issac said more banks are bound to collapse, and markets could be on the precipice of another 1980s-style banking crisis.

"There's no doubt in my mind: There's going to be more. How many more? I don't know," Issac said, comparing the situation to the banking crises of the 1980s and 1990s, when the FDIC dealt with the failure of over 1,600 banks.

For further clues that there's more pain to come, look to the market. Investors are clearly nervous about the potential for a cascade of bank failures, reflected in the stock price of a handful of regional banks on Monday.

First Republic, PacWest, Western Alliance, and Charles Schwab are among the major names that cratered on Monday morning as investors grow anxious about banks' ties to the tech industry or which may be sitting on large unrealized losses in their bond portfolios, two factors that catalyzed the fall of SVB.

Trading in shares of Western Alliance were halted 20 times since March 10 due to spikes in volatility, according to NYSE data. PacWest trades were halted 11 times, and First Republic was halted 13 times in that timeframe.

Biden, Yellen vow no bailouts

Though depositors have been made whole in both recent failures, banks and their shareholders should be prepared for the government to let them fail, and should not count on anything resembling a 2008-style bailout.

That message was broadcast clearly by both Treasury Secretary Janet Yellen over the weekend, and by President Joe Biden on Monday.

"Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we're certainly not looking," Yellen said in regards to a possible bailout. "And the reforms have been put in place means that we're not going to do that again."

As for Biden, the president was quick to point out that no bailout was coming and no taxpayer money would be at risk.

"Investors in the banks will not be protected," Biden said. "They knowingly took a risk and when the risk didn't pay off, the investors lose their money. That's how capitalism works."

He added: "No losses will be borne by the taxpayers. I'm going to repeat that -- no losses will be borne by the taxpayers."

Collapse at lightning speed

Finally, a startling takeaway from the SVB fall has been the speed at which the bank crumbled and was eventually shut down. This point is especially important in the era of digital banking.

Customers pulled $42 billion in deposits from SVB on Thursday alone, egged on by panicked messages on social media and from prominent VC investors like Peter Thiel.

For context, the biggest bank run of the Great Financial Crisis saw customers cash out $16.7 billion from Washington Mutual over 10 days.

Fundstrat's head of research Tom Lee compared the downfall of SVB to that of FTX, the now-defunct crypto exchange that went down at similar lightning speed. That could easily be the precedent for the future, he warned:

"When FTX collapsed in 2022, those in the traditional finance world viewed that lightning collapse as improbable in the 'real world' — but the collapses of SIVB, Signature Bank and Silvergate show this same dynamic can happen to any financial institution in this digital age," Lee said.