https://www.nytimes.com/2023/03/13/business/svb-collapse-com...
"Roku, the maker of the streaming media player, said in a U.S. Securities and Exchange Commission filing on Friday that roughly $487 million, or 26 percent, of its $1.9 billion in cash was tied up with Silicon Valley Bank"
(this was not very clever of them! But it seems to have been encouraged among the SV community?)
Companies above a certain treshold (and all citizens for that matter) should be able to bank with the Fed, and have peace of mind that the money they deposit there is not being put to work in any way, shape or form.
What developed over the last week is a victory for those who long for CBDCs .
Banks being able to lend out money is generally considered a good thing though.
There certainly are alternatives though for depositors that want to have more control in how their money is put to work: money market accounts, short term treasuries, etc
Banks are lending not their own money but depositors.
In a perfect world every citizen , small LLC and startup would be able to issue their own bonds if they need credit for purchases or entrepreneurial efforts
Could banks learn something from companies here, and drop the volatile long term bonds from their assets in favor of money market funds?
But it's not everything, not even close. It's only the amounts deposited in the standard class of bank accounts. Companies with large amounts of cash keep very little of that in bank accounts, it's in money market funds and other cash-equivalents.
It's certainly feasible and possible to have the "risk" part of the bottom of the risk-reward curve to be at the same level as the viability of the federal government. The risk isn't quite 0, but if the federal government collapses you have bigger problems anyways.
Especially in a high interest rate environment. Bank accounts essentially have a 0% nominal rate, which in a high interest rate environment is a very negative real rate so there is lots of margin for implicit or explicit insurance.