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Comment by RandomLensman | Hacker News Reader

Agreed, but I have severe doubts that we see a longer term solution that basically removes deposits from most banks - so in the end it will amount to some permanent government backstop of all deposits (and it is a government backstop because its borrowing ability is needed).

It might then need more regulation as to what can be done with deposits, how much can be paid on them etc.

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Obviously the regulations need to change, and frankly bad regulation is probably complicit in this whole affair. SVB is almost certainly NOT the only bank that invested money like this without the government knowing.

What really worries me is that the regulators might have seen these investments and not understood they were risky. Government bonds are pretty safe, right? Duration risk is sneaky and even though it’s obvious now, SVB was locked in back when rates were super low. Realizing the risk anytime after they got locked in is too late!

Applying the same stress tests to all banks regardless of the amount of deposits they have would be a good start.

Also, the FDIC insurance limit would be a lot higher than $250k if it followed inflation, but even if it did, a lot of businesses need to keep a lot of cash around to make payroll and float expenses. It doesn’t make sense for them to have the same type of insurance, and the same limits, as an individual person’s checking account.

Might as well give everyone an account at the Fed instead of tinkering around the symptoms. Commercial banks can then fund via bonds, CDs, etc., but not deposits (as they are inviolable). Basically, have a risky commercial banking systems and a riskless payment/checking account system.

SVB is almost certainly the only bank that invested money like this without the government knowing

Did you mean almost certainly not the only bank that invested money like this?

Yes, typo, edited the comment.

Note that we have just seen an even bigger example of regulators and «sophisticated» investors failing to do their job with the FTX collapse...

The businesses you refer to that need more than $250k in an account can purchase additional insurance. Example: I work at a financial institution and when we offer a $1m CD, the FDIC covers the first $250k and we purchase additional insurance to cover the remaining $750k so that the entire product is covered.

Any info on what that policy costs, per $1M

Not necessarily, the govt is still shopping for a buyer. You can looking into Wamu+Chase for a historic example. SVB has an even more attractive client base, ripe actually for even a rogue nation-state to sabotage.

Note also although TARP was as derided as it was, the govt and the public made a fantastic return on their investment

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