Because that is what a crisis is, and it’s how crisis response works!
> This has to be a long-planned contingency.
You can believe that this was a long-running conspiracy or you can believe that the people involved are incompetent screwups, but how can you believe both? Someone would have talked.
Do you honestly believe that people with “skin in the game” aren’t being hurt by this? SVB shareholders lost everything.
Do you also honestly believe that you can restrict the fallout of a banking system failure only to those who caused it?
That isn't how regulators deal with crises. Governments either execute long-agreed plans or flounder for months before organising to do something half-useful. The financial regulators are unusual in that they seem to struggle with the idea of publicising their plans ahead of the event.
> how can you believe both?
It is pretty normal. One of the reasons a democracy usually does so well is it turns out that the ruling classes in non-democratic nations are both incompetent screw-ups and busy conspiring to keep themselves in power. Then the competition from more evidence-based leadership in a democracy outmanoeuvres them.
The system is supposed to purge itself when there is evidence that the powerful are making big mistakes. Instead we get people who believe "protecting the system" is a good in itself being given a printing press and being told that they can do whatever they need to do. Nobody is talking about printing money yet, but it is the US's response to almost literally every crisis these days so I assume it is coming.
> Do you also honestly believe that you can restrict the fallout of a banking system failure only to those who caused it?
No. Which is why it should have been allowed to fail 10-20 years ago when the damage would have been smaller. Low interest rates and easy money is building up bad habits and large points of failure.
Printing money is how the US finances everything. If USD wasn't the reserve currency backed by US war machine, the entire country would have imploded some decades ago.
Responses, by literal definition, occur after the fact and in response to a stimuli. Do you accuse ambulance personnel of being unhelpful because they weren’t there to prevent an emergency from occurring?
I'm not sure what you mean. The FDIC is the contingency plan to bank failure. The response involves the FDIC taking banks in receivership and then paying back depositors.
The debate was hashed out in 1933 when the FDIC was created and has continued since. See here,
https://www.fdic.gov/about/history/
It's like other emergency government responses: there is autonomy built into the agencies because it's understood that being able to act swiftly is required, and that democracy can happen after the fact. FEMA doesn't hold votes on whether relief somewhere is required, the president can command military force without acts of congress in some cases etc.
I personally think it's debatable whether the gigantic nation states with representative democracies that we have now are the best possible system. But in this particular case the FDIC is pretty much acting as it was chartered to.
If they believe they are helping, why does the response always emerge suddenly on the day of the crisis with no debate or well explained contingency plan being activated?
The whole system seems to be built on one group revealing a sudden crisis that have obviously been building for a while. Then another group of people explaining that they have a plan, there is no time to explain, no need to explain and the objections are all mean-spirited fools who don't understand the plan. The plan which will be clearly explained sooner or later.
They're acting like people running a scam. None of these crisises are that surprising. Raising interest rates were likely to lead to this sort of fireworks display at some point in the short term. If the panic is genuine they should all be removed on the basis that they can't spot a tree in a forest. This has to be a long-planned contingency.
> You can't let the banking system collapse and expect it will only hurt the people you don't like.
The hurt happened a while ago now; banking collapses are the market recognising that it was mistaken about actions that it thought were wealth-creating but turned out not to be. This isn't a question of trying to "hurt" rich people, whatever that means. This is about concentrating the pain on people with skin in the game.
If people with skin in the game eat the losses, losses will happen less often. If the losses are diffuse, then losses happen more often. They're trying to cover up for incompetents because they meet them at parties, go to the same schools and have the same friends. And invest in similar assets, one suspects.