Alright, let’s jump into the Silicon Valley Bank (SVB) collapse and the current banking panic mania sweeping across the (especially financial) news. I thought the most helpful thing I could do was explain some of the basics and put it into a broader context.
The government has now apparently directed the FDIC to cover *all* SVB deposits, even over $250k, to be paid out of the FDIC insurance fund all American banks pay into. I would love to hear your feedback on that decision relevant to this situation.
On the one hand, since the failure is, as you point out, largely due to Fed policy and poor regulatory oversight, perhaps the extra payout is justifiable. Yet on the other hand, what kind of precedent does this set given that this may be just the first of many bank runs? Also, while some are calling this a 'bailout', I don't think it qualifies, since SVB will still be in FDIC receivership, only the individual depositors will be 'bailed out', not the bank itself.
Anyway, I would love to hear your followup on this matter, given the announced FDIC payout (link to official press release below).
The government has now apparently directed the FDIC to cover *all* SVB deposits, even over $250k, to be paid out of the FDIC insurance fund all American banks pay into. I would love to hear your feedback on that decision relevant to this situation.
On the one hand, since the failure is, as you point out, largely due to Fed policy and poor regulatory oversight, perhaps the extra payout is justifiable. Yet on the other hand, what kind of precedent does this set given that this may be just the first of many bank runs? Also, while some are calling this a 'bailout', I don't think it qualifies, since SVB will still be in FDIC receivership, only the individual depositors will be 'bailed out', not the bank itself.
Anyway, I would love to hear your followup on this matter, given the announced FDIC payout (link to official press release below).
https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm