In a just world these people would be stripped of everything they own.
There probably should also be better services out there for outsourced corporate treasury functions. ICD exists, but probably is too costly and specialized for smaller firms.
If that is not the new precedent, then this is a bailout of rich individuals and some specific corporations. That doesn't seem a problem to you? If the savings and loan of Bismarck North Dakota fails, is the government bailing out the car lot owner and the wheat farmer and the home builder?
Yes, the depositors would get bailed out, but the bank itself would be sold for parts. That might constrain the way that retail deposits are allowed to be managed.
A start would be undoing the Trump administration's rollback of Dodd-Frank stress testing requirements for smaller banks [1]. It will probably also mean the FDIC will require more insurance on deposits. This will all hurt profitability of banks, and reduce risk for depositors.
1. https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...
Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here.
Yes, the special situation will likely become the new normal. There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration (with the help of many banking-industry-aligned Democrats) eliminated in 2018 for banks with < $250M in deposits, and there will be greater insurance required on deposits.
Just 4 years after that change, the lessons of 2008 will have to be relearned.
Can't they just up the capitalization requirements and get the same effect with far less red tape and billable hours for consultants and lawyers?
https://www.clevelandfed.org/publications/economic-commentar...
And maybe you're thinking "Who would've thought.."
Probably people who work in finance, like VCs, that can do risk analyses.
For instance, I can get a loan from a bank for a mining operation that will contaminate the ground water somewhere. Thanks to bankers, I can expect that the locals will accept the money I'm paying my employees--since they can't distinguish it from any other money--even though they'd be much better off refusing it and continuing to drink clean water.
The way we practice money involves a loss of agency to whoever has less of it. A just world would require the consent of the locals, our world only requires that I prove to a banker that the operation will be profitable.