Here are the questions I asked Jun Bei Liu, a fund manager from Tribeca Alpha Plus, on my TV show yesterday. I think they capture what a lot of investors are wondering about right now.

First, the banking crisis. How scared are you? Her answer was basically that she is wary of what might come out of nowhere but she is investing on the basis that this is not a crisis of GFC proportions.

Second, how would you play a US recession? On this she argued it would be a mild recession, partly because she doesn’t see the crisis as a crisis but more of a challenge that came out of the too rapid rise in interest rates.

Third, what are you buying? Here she likes growth stocks that will do well when rate rises are over and, maybe, we’ll be seeing rate cuts later in the year to deal with a mild recession.

In two words, Jun Bei Liu, a highly respected fund manager, is cautiously optimistic. And Wall Street agreed with her overnight. This is the headline from the US business website CNBC: “Dow rises as bank shares rebound.”

All three big market indexes were up for most of the trading day in New York. The big driver was this rebound in bank share prices and that’s because the fear of last week about banks is dissipating.

Why? This explains a lot of it: “Market sentiment is improving as policymakers take steps to alleviate the recent challenges,” said Brian Levitt, global market strategist at Invesco. “An extension of the liquidity facility that had been set up by the Federal Reserve meaningfully eases prior concerns that a series of bank runs could be in the offing.”

So, the Fed has come to the rescue, which reduces the threat of runs on banks. And an emergency lending program was being considered for good banks that need to shore up the confidence of their customers.

Also, JPMorgan heavyweights came out and said concerns about Deutsche Bank were overblown and that the bank’s fundamentals were strong. Its share price rose 5% overnight.

This all comes as “bank failures have put a spotlight on the Senate Banking Committee as it eyes its first hearing into the jittery financial sector,” NBCnews.com reports. “The panel is packed with important players in the 2024 election, which could influence their approaches to an investigation into two of the largest bank collapses in U.S. history.”

Some financial commentators are calling for the $250,000 limit on protection for deposits to be raised. That’s unlikely but assistance is very likely to ensure that this banking challenge doesn’t become a real crisis.

One final point: bank failures in the US during problematic economic times is quite usual, as the table below shows.

Why is this the case? The Yanks have too many small banks i.e., mom and pop banks, not linked to a strong branch system, as we have here. You might recall, Milburn Drysdale, the banker to the Beverley Hillbillies, who would have sold his family into captivity to please Jed Clampett. Why? His bank would have been vulnerable if he’d lost a big customer. Lots of US banks are exactly like that.

Only in America!

It probably is appropriate to remind you about what Winston Churchill once said about Americans: “You can always count on the Americans to do the right thing after they have tried everything else.”

The Fed and other US regulators will eventually help take away this banking black cloud. This is why smart market players, such as Jun Bei Liu, are buying when others are fearful.