HUD Articles

Jordyn Burrell

Published: Mar. 6, 2024 at 10:49 PM EST

LANSING, Mich. (WILX) - It was a rough day for the parent bank of Flagstar after it nearly collapsed Wednesday afternoon.

People have money in more than 100 Flagstar banks in Michigan.

New York Community Bank was ultimately bailed out of the collapse by former Treasury Secretary Steve Mnuchin, backing the bank’s request for $1 billion.

A Mid-Michigan financial expert, Mike Douglas, said that for Flagstar bankers, now is not the time to panic. After last year’s shutdown of Signature Banks, customers scrambled to withdraw all of their money following the collapse of Silicon Valley Bank.

“It is not the time to go ripping your money out of the bank because if everyone does that, it will fail,” said Mike Douglas, President and CEO of Life Plan Financial Design.

New York Community Bank, which owns Flagstar Banks, almost collapsed after the Wall Street Journal published an article saying the bank sought much-needed cash. After word spread, stocks dropped more than 40% over the day—all because the bank didn’t have the billion dollars it was supposed to have.

“They got to a point where they are below the reserves they need as a bank of their size to maintain the appropriate ratios. There is laws in place to protect consumers, and the laws are there to say if banks don’t maintain certain levels of reserves, then they go under,” said Douglas.

The good news for Flagstar bankers is that they don’t have to worry about their money or ability to get it when needed.

“The FDIC and the federal government stepped in to say it’s not the customer’s fault that the bank screwed up its books and that the bank went backward on some things. So, our government does a pretty good job in those moments of stepping in and saying no, no, no, we’re going to protect the consumer, and we’re going to hold the bankers accountable,” said Douglas.

Once the news broke that the company received the money it needed, stocks rebounded to their previous levels.