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Tuesday, March 21, 2023 6:36:32 PM
"WASHINGTON — Regulators might have created fresh risks for the financial system when they agreed to back the uninsured deposits at two failed banks.
Both Silicon Valley Bank and Signature Bank held unusually large amounts of uninsured deposits, and their failures set off panic in the financial system that regulators worried could lead to a run on deposits at other banks with similar structures. To stem that deposit outflow, the Federal Deposit Insurance Corp., the Federal Reserve and the Treasury Department said they would back the uninsured deposits at the two institutions, sending an intentional signal to the depositors at other similarly sized banks that their money had an implicit guarantee.
"What we just did really is essentially implicitly guarantee all wholesale deposits," said Saule Omarova, a professor at Cornell Law School and one of the leading scholars on financial regulation. "Of course, the signal was received loud and clear, and it was meant to be seen loud and clear."
https://www.americanbanker.com/opinion/the-implied-guarantee-of-deposits-solves-one-problem-and-creates-another?cx_testId=3&cx_testVariant=cx_1&cx_artPos=4&cx_experienceId=EX04577VHVNT#cxrecs_s
"I started covering bank regulation well before I became a parent, but it has been long apparent to me that the skills required to be a successful bank regulator are in many ways the very ones that I use every day to keep my kids in line.
There are rules (no cookies for breakfast), and there is supervision to enforce those rules. I issue supplementary guidance statements to my kids all the time, including Frequently Asked Questions about the applicability of my rules; no cookies for breakfast does not preclude the possibility of cookies between breakfast and lunch, but cookies in the morning hours should be reserved for circumstances of enhanced market stress, like when Mom and I want to sleep in.
Chief among those parenting/regulating skills is the ability to strongly imply something without actually promising it: If you go to bed at a reasonable hour and don't wake up too early, Mom and I will take you somewhere special and get you a treat (turns out that special place is the hardware store and the treat is Wendy's drive-through)."
https://www.usatoday.com/story/money/2023/03/15/bank-safe-collapse-protect-money-svb/11474023002/
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