OPINION: The banking system is the plumbing of our economy. Like water and electricity, bank deposits are and should be guarded by the government.
“ The U.S. must regulate banks the same way it oversees nuclear power. We want depositors to be mindless, not mindful, when they put money into a bank. ”
Silicon Valley Bank’s failure was almost a traditional run on the bank, because SVB was functionally dead before the bank run occurred — prices of the bonds it held declined so much that its liabilities exceeded its assets. Unlike in a traditional bank run, most of its assets were not tied up in illiquid loans but in highly liquid mortgage-backed securities and U.S. Treasurys.
There is an argument that depositors whose deposits exceeded the FDIC limit of $250,000 per individual at Silcon Valley Bank and other banks should not be bailed out as they are just another type of debt holder of the bank. Full faith and credit The weekend that Silicon Valley Bank’s fate was being decided by regulators, I remember going to lunch and seeing a small bank I had never heard of in a small strip mall. I caught myself thinking, the beauty of our banking system is that I can open a checking account there right now and don’t need to spend hours studying that bank’s regulatory filings and loan book.
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