Re:Why America will soon see a wave of bank mergers
by ChadNauseam on Tuesday May 02, 2023 @04:17PM
(#35793516)
SVB did fail, with basically no repercussions to the economy as a whole. Under what interpretation was it too big to fail?
Re:Why America will soon see a wave of bank mergers
by evancox100 on Tuesday May 02, 2023 @06:26PM
(#35795059)
Ya but the uninsured depositors were still bailed out, so I think it's a little more complicated than that.
The FDIC insurance fund is predicated on any one bank (and their customers) being small enough that if you wipe out the uninsured deposits, the system as a whole will be ok. That was arguably not the case, or at least regulators didn't want to take that risk for SVB or Signature.
Was SVB too big to fail? Signature? Apparently!
TBTF is now a popular concept more than a legal one. We need explicit universal deposit insurance along with the rules that make that guarantee tenable. I also think experiments in narrow banking, e.g. permitting each state to charter a narrow bank open to its residents and guaranteed against losses (e.g. due to fraud) by its own treasury to access a special type of reserve account, need to commence.