Re: Silicon Valley Bank bailout. For a practical solution, I strongly recommend Sebastian Mallaby's column that appeared on the Washington Post's site this afternoon: https://www.washingtonpost.com/opinions/2023/03/13/silicon-valley-bank-bailout-regulation/ Since it's behind a paywall, here's the conclusion for those who don't have full …
Re: Silicon Valley Bank bailout. For a practical solution, I strongly recommend Sebastian Mallaby's column that appeared on the Washington Post's site this afternoon:
Since it's behind a paywall, here's the conclusion for those who don't have full access:
"But there is a solution. After the 2008 crisis, the Fed began to conduct regular stress tests on the largest lenders. These tests are a way of making routine the act of asking questions: Would the bank remain sound if the economy experienced a recession, the dollar fell sharply or oil prices spiked? The lesson from last weekend is that even medium-sized banks need this sort of attention.
During the Trump years, policy shifted in the opposite direction. Congress rolled back some of the post-2008 safeguards, and the Fed decided there was no need to burden midsize lenders unduly. But if depositors won’t discipline the bankers, regulators must do so. Otherwise, bailouts will become dizzyingly common — and far more expensive to the economy than proper regulation."
Re: Silicon Valley Bank bailout. For a practical solution, I strongly recommend Sebastian Mallaby's column that appeared on the Washington Post's site this afternoon:
https://www.washingtonpost.com/opinions/2023/03/13/silicon-valley-bank-bailout-regulation/
Since it's behind a paywall, here's the conclusion for those who don't have full access:
"But there is a solution. After the 2008 crisis, the Fed began to conduct regular stress tests on the largest lenders. These tests are a way of making routine the act of asking questions: Would the bank remain sound if the economy experienced a recession, the dollar fell sharply or oil prices spiked? The lesson from last weekend is that even medium-sized banks need this sort of attention.
During the Trump years, policy shifted in the opposite direction. Congress rolled back some of the post-2008 safeguards, and the Fed decided there was no need to burden midsize lenders unduly. But if depositors won’t discipline the bankers, regulators must do so. Otherwise, bailouts will become dizzyingly common — and far more expensive to the economy than proper regulation."