But then there's this whole other narrative about the banking system as a whole, and that side of this I'm much more annoyed by. It really reminds me of the financial crisis bailouts, which I found frustrating, being painted into a corner like that and forced to save the banking industry. And this is frustrating for the same reason. Which is not to say it isn't the right decision! It was the right decision in the financial crisis and I trust that it's the right one now.
But until the FDIC and Fed and Treasury clearly all came to this conclusion, I was more skeptical of this narrative, because most banks don't have such a high concentration of uninsured deposits as SVB did.
But I do trust that the regulators had more information than me about the systemic risk of this, and made the right decision, and like you said, I'm very glad we have that institutional capacity.
The socialization of the losses is the mechanism where any losses that do happen will be passed on to other banks, who will pass that on in some way. I am certainly glad it isn't taxpayer funds, but it's not a free lunch.
"Hold on, let me just... I'm sure there's a Good Reason around here somewhere..." - Hot Take Taylor
If there was no risk, JP Morgan would be willing to step in to capitalize. The fact that they won’t tells me this is a bailout.
I'm very open to ideas about how to change the program to better support businesses on the large side of small or the small side of medium. I think raising the insurance limit, maybe conditioned on payroll size or something, and thus also raising the insurance premiums, seems like an idea that makes a ton of sense.
But that wasn't the rule on Friday, and it wasn't what the premiums historically charged to banks to build up that insurance fund were priced for. And it's especially rich that banks (like SVB!) have long lobbied to keep those premiums low, and now want to benefit from suddenly switching the insurance policy to be unlimited. It's like if I constantly pushed to keep my home insurance premium low with the trade-off that they would only cover part of my losses in a fire, and then after a fire I made a big stink about how my insurance company should cover an unlimited amount of my costs to rebuild.
This is the second time in my life now that I've woken up to find that I'm being held hostage by banks essentially saying to my government "nice society you have there, it would be a shame if something were to happen to it...".
They're right, we do have to bail them out, but it's bad that this is the case.
I have a ton of empathy for everyone with business or paychecks at risk, really I do. But I also don't like continuing our march toward privatizing profits while socializing losses.