4 ms·
Is it cheaper to let 9 more fail or give the green light to moral hazard for hundreds or thousands more?
by zhte415 4y ago
Is it cheaper to let 9 more fail or give the green light to moral hazard for hundreds or thousands more?
- nullc 4y agoWhats the moral hazard here? Every bank is illiquid if pushed hard enough.
- JumpCrisscross 4y agoSVB wasn’t illiquid. They were insolvent, as declared by their regulators. If they were simply illiquid, they could have borrowed at the Fed’s discount window.
- auntienomen 4y agoTo be fair, the bank run is what made SVB insolvent. Prior to that, all they had was a liquidity problem. A rather big one, but if depositors hadn't bailed, SVB would just have had subpar growth for a few years.
- JumpCrisscross 4y ago> the bank run is what made SVB insolvent. Prior to that, all they had was a liquidity problem. The bank run exposed the insolvency. But it was already there. That’s why SVB couldn’t solve their problems at the Fed’s discount window. SVB lobbied for exemption from the Fed’s stress tests and Basel III that would have prevented this problem. The policy treatment is rolling back those changes so regional banks are covered.
- LatteLazy 4y agoWell we should really not rely on morality, we should have regulation instead. Otherwise letting bankers gamble away depositors money is not really any better than letting them do it with taxpayer's money. And people will stop using all banks, even honest ones...