I wish the US Govt had done closer to what Iceland and a handful of others did in 2008... No, we aren't bailing you out, you pay out domestic deposits first, and then if there's anything left, the rest. And no, you don't get to take/keep bonuses for it.
Modern corporate structure and liability shields to the level they exist in the US is anything but libertarian. You make bad choices, you live with the consequences.
In the narrow statement that I replied to, a proposal was made to have the federal government enact a kind of insurance that has long been available in the private sector. My understanding of libertarian perspectives (based purely on hearing what libertarians say) is that doing it in the private sector would be preferable.
Particularly considering that the problem for the depositors was that they weren't availing themselves of private-sector solutions, not that those solutions failed.
I may be complete wrong on this, though, as I am not a libertarian.
Perhaps I misunderstand the different strands of libertarianism, but what kind of libertarian prefers mandatory government insurance over voluntary private insurance?
I understand "libertarian in theory" ... I am waiting however for a libertarian from Silicon Valley to say that we should have let all these Silicon Valley entities fail for being stupid with their finances in this very real-world scenario. Help me understand a more moderate libertarian position.
We tried more libertarianism in the 2018 legislation that removed some of the need for hedging for SVB and look where it got us. How does it help us from here?
I don't mind a little libertarianism... But it seems to me if the savvy Silicon Valley folks can't manage their payroll risk with all their smarts, what about payroll for a bank in Kansas? I am not a fan of government intervention particularly and the moral hazard of guaranteeing all depositors disturbs me. But despite that, I also don't really consider SVB a one-off... the fact that SVB is just one of many (hopefully smaller) banks with this whole "class" of risk. So while I would have preferred more guardrails around how much depositors were covered, I also can't bring myself to completely condemn FDIC risking moral hazard to ensure stability to try to avoid psychological contagion spreading to a LOT more banks.
The problem is that libertarianism and preventing bank runs just seems to me like problems with "unrestricted short selling" or "calling fire in a crowded theater"... if you don't impose checks on it, the incentives for malicious behavior are so great (and the costs to being malicious so small) as to be counter-productive. Why not go all the way to anarchy? Do you really think market forces will magically govern against abuse and malicious claims without the force of the state? It would seem to devolve to mafia land where powerful factions just agree not to mess with each other and you have to have "pull" to get protection... which is exactly the critique Ayn Rand had of socialistic governments.
I was curious to hear what people say and despite my post getting downvoted to -2 points (it wasn't worded particularly well to avoid misinterpretation) I do appreciate all the replies.
Such insurance exists on the private market already and is commonly used by businesses who have large sums of cash on deposits. Presumably, the depositors at SVB didn't do that because they didn't want to pay for it.
Wouldn't a libertarian prefer that over having the government do it?