[DannyTN]

It's not like the government doesn't have a lot of options. But they do need to restore confidence quickly or they could have bank runs on a lot of smaller and regional banks. And I understand SVB was not a small bank. SVB didn't have a diversified client base like most big banks but they ranked #16 in terms of assets. Things the FED could do include:

• Pausing interest rate hikes to allow Banks time to adjust their asset portfolios.
• Lower the capital requirements for banks from the new 11% back down to 8% or even lower. It can be temporary, again to allow banks time to adjust.
• They could buy up all the long term government issued debt that is underwater due to the rate hikes at book value. The FED would have to recognize a loss when they did that. The same paper loss that the banks were facing due to the rate hikes. But if the FED then holds that debt to maturity they would recognize a gain equal to the initial loss, plus the interest that the asset yielded. The Fed would be whole. And banks would be whole with a ton of liquidity. Banks would then be free to reinvest their funds in shorter term assets and at higher rates.
• Steven Van Metre suggested the Fed lower the overnight repurchase rate to zero or at least below what banks are offering so as to not be competing against the banks for deposits. This would theoretically cause deposits to flow back into banks, as banks would again be paying the highest interest rates on short term deposits.
• They could boost FDIC insurance to $500,000 on all small and regional banks. If they stop the runs, they wouldn't have to pay anything out. And again, when they take over a bank like SVB, the Fed gets assets. It's just a problem to unwind them.

[C210N]

[EBH]

You are correct!

BKMK this post.

[Brian Griffin]

How about pausing inflation?

Rates will then drop.

Tax away all personal income above $1 million annually when inflation in the tax year has been above 3%. That will make CEOs fight inflation.

Tax away all corporate income above 1% of 2020 sales on a like basis.

[Brian Griffin]

FDIC insurance premiums have been absurdly low.

Why should the government be insuring private bank operations anyway?

If people want government insured debt, they could buy savings bonds, which paid about 3% in my youth.

[Brian Griffin]

There is no evidence of a wide spread banking problem.

One bank lending to risky high tech companies biting the dust is to be expected.

Normal bank might because of inflation have capital of market value of say $900 million instead of $1 billion.

I’ve lost at least 3% a year in buying power since the madrasa educated Kenyan moved into the White House.

[cgbg]

“They could boost FDIC insurance to $500,000 on all small and regional banks”

That is the move I would expect. Inflation is already eating away the usefulness of the $250K limit anyway.