I’m just not sure what moral hazard was involved in THIS situation with SVB. All indications are that a major factor in its collapse was that the bank was too conservative in its reserve investments.
SVB execs were way too risky with their investments...way too much money in “AFS” (available for sale) bonds and not enough in “held-to-maturity” (HTM) bond assets. Other more responsible banks shifted their bond portfolio to heavy on HTM. Plus they held far too little in cash reserves (”fractional reserve banking” come home to roost again like 2008). The new Fed bank reserve requirements are now 0, zip, nada (used to be 10%). We need to go the other way on reserve requirements...a “full reserve bank” might be popular!
Backstopping banks like this just encourages future bad behavior/dangerous risk taking -—>”moral hazard”.
https://freerepublic.com/focus/f-news/4137677/posts
https://www.federalreserve.gov/monetarypolicy/reservereq.htm