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We definitely disagree, because anything less than 100% was going to result in the failure of other banks -- probably FRB among them. (It's very hard to argue that there wasn't systemic risk when Signature also failed!)

Isn't this a bit of a narrative switch? It seems like this started with empathy for founders and employees of companies with deposits at SVB, and I feel that very strongly, for all those individuals.

But then there's this whole other narrative about the banking system as a whole, and that side of this I'm much more annoyed by. It really reminds me of the financial crisis bailouts, which I found frustrating, being painted into a corner like that and forced to save the banking industry. And this is frustrating for the same reason. Which is not to say it isn't the right decision! It was the right decision in the financial crisis and I trust that it's the right one now.

But until the FDIC and Fed and Treasury clearly all came to this conclusion, I was more skeptical of this narrative, because most banks don't have such a high concentration of uninsured deposits as SVB did.

But I do trust that the regulators had more information than me about the systemic risk of this, and made the right decision, and like you said, I'm very glad we have that institutional capacity.

Why let depositors in the US banking system lose capital when there's an insurance fund covered by the banking system itself for this purpose? The investors in SVB lost everything, isn't that accountability enough? You really want businesses with payables and payroll that exceed the FDIC limit by millions to be exposed to risk for relying on the US banking system, to what end, why?

Because this isn't the purpose of that insurance fund. Its purpose is to cover insured deposits, and these are uninsured deposits.

I'm very open to ideas about how to change the program to better support businesses on the large side of small or the small side of medium. I think raising the insurance limit, maybe conditioned on payroll size or something, and thus also raising the insurance premiums, seems like an idea that makes a ton of sense.

But that wasn't the rule on Friday, and it wasn't what the premiums historically charged to banks to build up that insurance fund were priced for. And it's especially rich that banks (like SVB!) have long lobbied to keep those premiums low, and now want to benefit from suddenly switching the insurance policy to be unlimited. It's like if I constantly pushed to keep my home insurance premium low with the trade-off that they would only cover part of my losses in a fire, and then after a fire I made a big stink about how my insurance company should cover an unlimited amount of my costs to rebuild.

This is the second time in my life now that I've woken up to find that I'm being held hostage by banks essentially saying to my government "nice society you have there, it would be a shame if something were to happen to it...".

They're right, we do have to bail them out, but it's bad that this is the case.

What losses are being socialized? This is a liquidity issue that is being reconciled with short term loans, not a solvency issue being bailed out with tax dollars.

So I don't know for sure, but my intuition is that if this were a great deal with no losses, there would have been a private solution.

The socialization of the losses is the mechanism where any losses that do happen will be passed on to other banks, who will pass that on in some way. I am certainly glad it isn't taxpayer funds, but it's not a free lunch.

Your comment really amused me.

"Hold on, let me just... I'm sure there's a Good Reason around here somewhere..." - Hot Take Taylor

I mean, they spent the weekend trying to find a private buyer and clearly nobody wanted it. Doesn't seem to be a reach to conclude it might not actually be a great deal for the new owners (the US government)...

The onus is on the people claiming that this is a no-risk deal for the FDIC. Otherwise, seeing this as a bailout is the reasonable conclusion.

If there was no risk, JP Morgan would be willing to step in to capitalize. The fact that they won’t tells me this is a bailout.

> I also don't like continuing our march toward privatizing profits while socializing losses.

We're already there, aren't we?

I don't think so? Or at least I don't think there is a final end state that we were already at, and I think we are closer now than earlier today.