Looking at the bigger picture, I do not know if this was the correct decision. The depositors were bailed out (it wasn’t just a liquidity issue) and the FDIC is paying for it.
This means all FDIC members will need to pay less interest on deposits to make up for increased FDIC insurance cost.
This will increase the speed with which people take out deposits and put it into e.g., short term treasuries because they get more interest. Enabled by easy-to-use fintec made in Silicon Valley.
This will decrease bank profitability.
And this is on the “Liability” side of the balance sheet. If the FED is successful in causing a recession surely there will be a lot of insolvencies (people swimming naked etc.) and there will be problems on the “Asset” side as well.
How can this end well? We just failed at most easy hurdle here.
This means all FDIC members will need to pay less interest on deposits to make up for increased FDIC insurance cost.
This will increase the speed with which people take out deposits and put it into e.g., short term treasuries because they get more interest. Enabled by easy-to-use fintec made in Silicon Valley.
This will decrease bank profitability.
And this is on the “Liability” side of the balance sheet. If the FED is successful in causing a recession surely there will be a lot of insolvencies (people swimming naked etc.) and there will be problems on the “Asset” side as well.
How can this end well? We just failed at most easy hurdle here.