Not much of a choice. Guarantee of the system takes highest precedence.
Although this problem was caused by bank malfeasance and yes this does imply de facto unlimited insurance, unlimited depositor insurance is kinda the whole point and is not itself a bad thing.
Yes, moral hazard is a huge consideration, but I don’t see depositor protection as encouraging future failures of this type, by encouraging bad risk taking by mgmt.
Rather, if banks bet their customers money unhedged on endless zero rate policy, as SVB did, there should be regulations that prevent it. Trace back to lobbying to exclude SVB from dodd frank regulations also at the heart of the crisis.
Although this problem was caused by bank malfeasance and yes this does imply de facto unlimited insurance, unlimited depositor insurance is kinda the whole point and is not itself a bad thing.
Yes, moral hazard is a huge consideration, but I don’t see depositor protection as encouraging future failures of this type, by encouraging bad risk taking by mgmt.
Rather, if banks bet their customers money unhedged on endless zero rate policy, as SVB did, there should be regulations that prevent it. Trace back to lobbying to exclude SVB from dodd frank regulations also at the heart of the crisis.