prevented multimillion-dollar losses for thousands of companies that relied on Silicon Valley Bank. But the fallout from the largest bank failure since the 2008 financial crisis is still reverberating.
You don’t want too much concentration in the megabanks . And regional banks like SVB are probably better able to compete with those banks than the little guys. But there’s certainly room to debate whether we don’t need as many banks as we have now. At this stage it’s extremely unlikely lawmakers would agree on a bill that would lead to any substantial changes — like Warren and Porter’s rollback of the Dodd-Frank rollback — that would make it across the finish line. Not enough Dems support it and it’s a divided Congress.
It might be hard to keep suggesting that every bank poses that kind of risk! And of course, that’s not what Congress has said — the deposit insurance limit is set at $250,000. That said, this could spur a change in deposit insurance law sometime in the future. The Fed has intervened to insulate open banks against liquidity concerns related to the open banks. Preventing a contagion likely played a role in invoking these systemic risk authorities for banks that are otherwise not central to the financial system. Crisis-fighters largely lost their authorities after the 2008 financial crisis to protect individual banks from contagion without first closing them.
All of that to say, this is a tricky place for the Fed. What we saw with the banks was an example of how rate moves can suddenly hit, with a delay, in unpredictable ways. And so they have to be worried about going too fast and breaking something else. But they might still do a small increase later this month because they’re still worried about inflation. It’s about risk management at this point.
It's impressive to see a 'news' article that says crypto lost its value past tense and never mentions the current rally that has exceeded the pre svb crash value...that's a really low conniving way to twist the current situation!