Why shouldn’t parts of a functional financial system be allowed to fail without massive contagion? Part of a healthy market economy is providing ways for weak businesses to fail and be replaced with new competitors.
I lose confidence in banks when their failure results in special treatment that no one else has access to, perpetuating the behavior that caused the failure.
Your sort of loss in confidence don't lead to further bank runs and complete collapse of the financial system so I think it's a loss they are willing to suffer.
> perpetuating the behavior that caused the failure.
A detail post-mortem is going to be needed to be done to see what cause this whole mess.
So far it seems their mistake is buying "risk free" bonds when they shouldn't have - but then again who could have expected interest rates to rise so quickly - and not having a diverse enough depositor base - SVB served mainly tech and Silvergate is heavily exposed to crypto; both sectors took hits recently resulting in people redrawing lots of money for a variety of reasons and it ultimately caused a run.
That's what I figured out watching various YouTube videos anyway.
> So far it seems their mistake is buying "risk free" bonds when they shouldn't have - but then again who could have expected interest rates to rise so quickly
Over a period of 10 years which is the duration of the bonds they bought, I would say that the chances are pretty fair.
A controversial statement to some, but IMO the US is a Corporatocracy more than a Federal Constitutional Republic. More "Modern Corporate Capitalism", less Free-market Capitalism.
Point being, some businesses _are_ more equal than others because they have the money to lobby lawmakers. In an actual free market, the banks should fail.
However, it seems to me that the situation with SVB is a Democratic Socialist move. Again, my opinion, but it seems rather progressive. In history, Democratic Socialist programs have produced, arguably, valuable programs for the US. Unfortunately, mentioning "Socialist" is usually the point in which many will stop listening.
Why are some businesses more equal than others?