Very clearly there is a large chuck of this forum that doesn't understand that.
Those same people are going to lose their jobs and burn through all their savings and be unable to secure loans to buy houses.
Even if you bank at a supposed safe and secure credit union, a systemic crisis will affect them as well. You won't be able to get a loan. There goes your opportunity.
The whole financial and economic system is intertwined and you're part of it, if it blows up and crashes into the rocks, you're going down with the ship as well. Get over your Main Character Syndrome where you think you're going to be the one immune to the catastrophe.
We're fucked if those people win, and I'm seeing that sentiment come from liberals and conservatives alike.
All of these described above are "disrupting" the economy. And none of them is in our interest.
It's really quite concerning because some of these people have tremendous power. I suppose the only positive is that a number of titans of Silicon Valley are not savvy enough to challenge increasingly assertive governments.
Many of the governed see what policymakers and politicians call 'systemic risk' and 'instability' as a not so unwelcome wildcard considering that the wealthy of today are mostly descendants of wealthy land owners from the times of the Crusades.
> > They did their job and did it quickly and effectively
Where are the Fed , D.C. , the FDIC etc. when a gas station goes belly up? Or a small family owned boat builder in Maine? Nowhere to be found. Their fault? Not being systemically important enough. Whatever the fuck that means.
I'm curious if you have a citation to support that the wealthy in the US are descendants of wealthy land owners from the times of the Crusades at a substantially greater rate than the general population.
> Where are the Fed , D.C. , the FDIC etc. when a gas station goes belly up?
How much of their going belly up was due to Fed policy? Particularly driving and holding interest rates to near zero through market actions then pushing interest rates to nearly 5%?
One of the major draws to the US has always been the opportunity to do a little crusading of ones own and find whatever opportunity your courage and lack of scruples allowed you to get away with.
I think something like this could make large banks more of an asset for the economy rather than a liability. I wouldn't want to just set a maximum size. If a bank wants to get huge and maintain conservative and safe asset/deposit ratios, good for them.
Any bank call pull in deposit and use them as capital. But being a customer also doesn't give one any particular upside - you just get interest on the money you deposit. And if you have a special bank with only large deposits and paying extra high interest, then regulators look at you and quite likely see something not to be protected in the same way.
The way you get risk is basically the way SVB did it. Share holders can lose at most their entire capital but they can get to play with all the money the depositors give them. If they bet on something that pays off big, they get that payoff minus the modest interest they pay depositors and if they lose, they lose at most their capital.
Come to think of it, that seems a bit like what SVB did. Buying long term bonds when interest rates were likely rise seems like a recipe for disaster - and in fact the logical outcome was this bankruptcy. But there was a chance that interest rates wouldn't have risen, at which point the shareholder get a big payoff, pocket it and go on to the next risky maneuver.
No, there are systemic risk exceptions within the rules. If a bank is large enough, then the systemic risk to the economy as a whole is large enough to warrant this step. "Too big to fail" is typically a derisive comment, but it is not without practical reason. Governments are supposed to act in the best interest of the governed. I hope it is clear to all of us that avoiding the economic disruption of a cascade of bank failures is in our interest.
Smaller bank failures do not pose systemic risk and so they will not be backstopped in the same way. Might seem like unfair treatment, but practical concerns often outweigh the theoretical. By the way, SVB is still a failure and as a company is now gone. Some other entity will take over its assets, debts, and customer services. All senior management has been removed.
>I understand part of this is human nature but I really wish we could plan for these entirely foreseeable events ahead of time so that it's not just cases of "selective justice" with regards to who gets bailed out.
We did. That is why we have the FDIC, the Federal Reserve, and the Treasury department. They did their job and did it quickly and effectively. SVB did not get bailed out, the depositors did.