They removed reserve requirements (ie. cash you need to keep on hand) but there's still capital requirements (ie. assets you need to keep on hand).
https://www.federalreserve.gov/newsevents/pressreleases/mone...
Capital requirements are complicated. There are different types of equity and assets are risk-weighted, but treasuries and the types of bonds SVB bought are generally given the lowest risk-weightings.
In banking, we want a flight to quality.
Let me bite the bullet:
Flying is arguably way too safe. In the sense that flying could compromise a bit on safety, and still be much safer than cars. If that compromise would lead to lower costs and thus prices, perhaps more people would fly and fewer would drive; leading to better safety on average. Despite flying becoming less safe.
We already know cheap flying with current safety standards is economically viable, with costs approaching the cost of fuel; see low cost airlines like Ryanair. So the most effective way to lower prices is for airlines to downgrade amenities and services onboard.
I think flying could be made cheaper and massively more convenient by getting rid of airport security the way it is done right now. Imagine planes being boarded like trains: there might be a security tradeoff but it would be offset by the massive time benefit for everyone involved. I know I would take that risk, I consider my own time to be more worthy than TSA considers it to be
As an example: planes almost never crash. Which is great! So you could drop the requirement to carry life-vests, without compromising safety numbers.
(If you want, you can invest 50% of the cost savings into eg anti-malaria nets, and you'd come out way ahead in terms of lives saved.)
Similarly, airplane seats are massively over-engineered. You could loosen restrictions there, and save weight and thus costs.
I think Japan might already have different domestic regulations there. I remember being on a domestic flight between Kobe and Tokyo, and the seats in economy class used a lot of mesh over aluminium frame or so. They looked a lot lighter (and also more breathable) than your typical airplane seats. See https://photos.app.goo.gl/ZDWQTNMB93mQs5Yz5 for a picture that I took.
I also agree with vlack-vingaard, but they already gave some good examples.
That said, the FAA != TSA. We like the FAA. They solve actual problems.
How does that work when a plane lands on my house?
It's very similar to why we allow cars to crash so much in the first place. To paraphrase JumpCrisscross:
> How does that work when a [car runs me over]?
So I can say: I just want planes to be as safe as, say, trains. (Or whatever other form of transportation is safer than individual cars, but not as over-burdened as planes. Perhaps busses?)
Small depositors aren't finance pros, they don't have the training or network to monitor bank management, so we protect them from rogue management.
Large depositors can and should worry about their bank's solvency, so we focus their minds by leaving their deposits uninsured.
Unfortunately, when large depositors catch a whiff of insolvency, they don't help fix the problem, they're first to pull their deposits and leave everyone else to pay the bill.
So we should treat them as we treat creditors in a bankruptcy, and claw back the cash they were able to withdraw in the days leading up to the bank's closure.
(And really skittish depositors could switch to banks that only invest their deposits in eg government bonds. Which are probably about as safe as FDIC insurance.)
Otherwise you could make the same argument you just made, and expand it to: shareholders should be comfortable, it should be regulators (or someone else) that should be monitoring, etc.
But it's an interesting thought.
No matter your capital structure, all your liabilities will be matched by assets. What matters is that after your accounting for your fixed liabilities, like deposits, you still have plenty of total assets left over to have a thick equity cushion to absorb losses.
In accounting terms, equity is also a liability. But it's a very benign one, as your shareholders can't demand their money back.
There are other forms of liabilities that act like equity in their ability to absorb losses. But equity is the simplest and generally the most import one.
See https://martin.kleppmann.com/2011/03/07/accounting-for-compu... for an intro.
Accounting might sound rather boring, but at its core its about understanding businesses (and economies) with numbers. It can be as varied and interesting as companies are.
Of course, in practice there's lots of cruft build on top of relatively simple concepts. But the simple underlying concepts are still fascinating. The link above explains double entry book keeping in terms of graph theory and network flows.
The basics of deprecation are also quite interesting (to me, at least).
To me, accountants have a better grip on reality than economists. It's an accountant who taught me real economics (I was originally pursuing a math degree with economy as a 'minor' (not really how it's working in my country but close enough)). I had to unlearn some of what I learned in my first year, but I had a way better grip on how money work after that (and decided to create value and changed course).
Accountants and economists are doing different things. Both fields are useful, and there's some small overlap between the two.
Many people could benefit from learning some 'rationalised' accounting, ie accounting without the accumulated historical accidents and tax dodges. (Those are also interesting. But less as a description of a reality, and more in the same vein that the Talmud is interesting.)
And then like 5 years ago, i learn about MMT, read about it, disagree on some points, but it overall make much, much more sense and si way closer to reality than Friedman theories to me. It seems like macroeconomics do follow the stuff i learned when i wanted to become a quantitative analyst or whatever (i only wanted to do math tbh, and didn't follow finance classes that much).
And then during Covid we have all those "expert" economists who start to talk everywhere. But now, i am sure they are talking out of their own asses. They had now idea of what production is. The simple idea that production is linked with energy is novel for them. They probably are useful, like sociologists are useful, but i'd like to hear them on medias as much as i hear sociologists. Or even less, since i do think sociologists have real-world application to their thesis, for harm reduction during stampede. Let's say as much as medievalists historians.
Have a look at https://www.econlib.org/library/Columns/y2021/Sumnermodernmo... for MMT.
I suggest having a look at market monetarism. See eg https://marketmonetarist.com/2015/07/14/the-euro-a-monetary-...
What kind of orthodox economy theory have you had a look at?
SVB had liquid assets (bonds) that it could sell to meet the demands of the depositors, but those assets fell in value creating losses. The bank was forced to crystalise those losses because it had no cash buffer to fall back on.
If some substantial part of the liquidity had been held as cash this wouldn't have happened.
But they preferred to gamble.