> they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four.

One of the primary issues being discussed is the insured limits at banks, and the uncertainty on whether depositors can be made "whole" (it's unclear whether people saying that mean 100% or something close to 100%, so I'm putting it in quotes, some people are being really loose with their terms in this thread). Why the fuck would people, given that context, ever move "all of their money" to only the biggest 3 or 4 institutions and increase their risk by consolidating in exactly the same way that caused the current problems? If anything this is a potential boon for the many smaller banks as they can gain additional depositors as people wise up to their risk exposure.

Because if there was a run on JP Morgan, the US government would absolutely "bail out" depositors.

Consolidating increases the risk of a bank run, decreases the risk to the individual depositor.

I can see the logic of that, "Let's act irrationally together and force the government to bail us out next time we make a run on our own bank." Or they can act rationally, distribute (manually or through existing methods) their cash across multiple banks so that their risk exposure is lower and they don't have to depend on the government maybe, possibly, bailing them out. You know, the thing they'd have done if they'd hired financial managers in the first place (which obviously they didn't, or they hired incompetent ones).

It's not irrational to act in your own interest. It's irrational to suppose that everyone should act in the majorities interest.

I'm not saying they should act in the majority's interest, I'm saying they should act in their own interest. Mitigate their risk by managing their capital properly instead of hoping ("Hope is a poor substitute for strategy") that things will work out. It's irrational to act in a way that, if a failure occurs, requires someone else to bail you out when they aren't legally or ethically required to bail you out. That's operating on hope, not strategy.

Putting all your capital in one too big to fail bank is the least costly option and the optimum strategy.

Until the US lets the largest bank fail this will continue to be the case.

The top four banks are too big to fail and WILL be rescued, as happened in 2008. Bank of America or Citi failing would be the end of America as we know it. That's why everyone will move to the bigger banks. Which is obviously not what we want. But it's what will happen if you leave depositers out to dry because it's a smaller bank.

I don't think that's likely. Most banks have about half of their deposits FDIC insured because their depositors have low balances. SVB only had 3%. Most banks are unlikely targets for a bank run as a result.

This is simply not true and very easy to verify via

https://banks.data.fdic.gov/bankfind-suite/bankfind

Most banks actually have most of their deposits NOT insured. Most banks are not bofa.

Most small banks already have arrangements with bigger banks to cover them in situations like these (usually in the form of a bank-to-bank loan). For example, I know that First Republic has this arrangement with JP Morgan Chase.

What killed SVB was their mismanagement. Per the CFPI, SVB was insolvent at the time it was taken over, meaning they actually did not have sufficient assets on hand to cover their liabilities, even if their assets had been held to term.