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Oh, "no one". Gosh golly, impressive how you can read minds like that. That program was an always-temporary response to a major financial crisis. I expect most
by wpietri 4y ago
Oh, "no one". Gosh golly, impressive how you can read minds like that.
That program was an always-temporary response to a major financial crisis. I expect most finance professionals knew that it was temporary.
But suppose you're right. Suppose all the cool kids thought they'd get bailed out no matter what. In that case, it's even more important now to not use taxpayer money to prevent the big-money SVB accountholders from taking a haircut. Because your justification here is exactly the kind of moral-hazard problem that regulators are very eager to prevent.
- jlmorton 4y agoThe Transaction Account Guarantee Program was industry-funded. There is precisely zero moral hazard in protecting depositors, who have no ability to gauge the risk in any particular bank on an ongoing basis, particularly with an industry-funded program.
- wpietri 4y agoIt wasn't the industry guaranteeing the funds, it was the FDIC, meaning the taxpayer. If the industry wants a program like that, they can create it. Indeed it already exists: https://www.difxs.com/DIF/Home.aspx https://www.difxs.com/DIF/Home.aspx But depositors obviously have the ability to gauge risk, especially sophisticated depositors with millions of dollars of cash lying around. Otherwise people wouldn't be squawking right now about the risk of money being moved out of certain banks to certain other banks. Otherwise things like the DIF wouldn't exist. Otherwise treasury management wouldn't be a whole profession. The problem is that many depositors are not looking just for safety, they pick other things, sometimes over that. Which is their right! But sometimes when trade safety for other things, it turns out badly for them.