Created
Wed, 15/03/2023 - 08:00
I don’t pretend to understand all the nuances of this crisis and I’m withholding judgement until we see how it all shakes out. But this is someone who knows a lot and is always worth listening to: So the Feds stepped in to protect all deposits at Silicon Valley Bank, even though the law says that deposits only up to $250,000 are insured and even though there was a pretty good case that allowing big depositors to take a haircut wouldn’t have created a systemic crisis. S.V.B. was pretty sui generis, far more exposed both to interest risk and to potential runs than any other significant bank, so even some losses for larger depositors may not have caused much contagion. Still, I understand the logic: If I were a policymaker, I’d be reluctant to let S.V.B. fail, merely because while it probably wouldn’t have caused a wider crisis, one can’t be completely certain and the risks of erring in doing too much were far smaller than the risks of doing too little. That said, there are good reasons to feel uncomfortable about this bailout. And yes, it was a bailout.