Effectively there are two banks (Silicon Valley Bridge Bank, N.A. and Signature Bridge Bank, N.A.) with de facto unlimited FDIC insurance, as there's explicit guarantee for all existing and new deposits.
Somewhere between "$250k" and "infinite" would have been less moral hazard. Feels like we've set a dangerous precedent, but only for depositors who are politically connected and can instill panic. When does the de facto unlimited FDIC insurance expire/ When does Silicon Valley Bridge Bank go back to normal? Second: IIUC, any shortfall in making SVB depositors whole will come from a levy on the rest of the banking sys…
The only “moral hazard” being created here is encouraging people to deposit money in smaller banks.
If the govt hadn’t created the “moral hazard” then people and businesses would simply have chosen to do all their banking with the much safer big banks like Chase and Citibank.
The reality is that Americans don’t want all banking to be concentrated in the hands, but smaller banks are significantly more risky and inefficient. Depositing money in the smaller banks and not just the top handful is the “moral hazard” that has been created by government intervention.