Los Angeles Times
There oughta be a law (there was)
Re “Feds reassure failed lender’s clients,” March 13
Your coverage of the Silicon Valley Bank and Signature Bank failures has been thorough, but some articles have omitted one very relevant fact.
After the banking failures of 2008, Congress enacted the Dodd-Frank law, which among other things required banks with assets over $50 billion to meet certain stress tests, including retaining sufficient liquidity to meet likely depositor demands. The Trump administration watered that down, raising the threshold to $250 billion.
That let both Silicon Valley Bank and Signature Bank escape the tougher liquidity requirements and forced the Federal Deposit Insurance Corp. to take them over. Thanks again, former President Trump. Ken Goldman
There is a little-known fact about the recent bank failures.
The FDIC has only $128 billion, a tiny fraction of the funds needed to cover the estimated $10 trillion in insured bank accounts. If just a few mid-sized banks failed, the FDIC itself would be insolvent.
This would require the Federal Reserve to step in and loan these banks enough to cover customers’ accounts, as it just did for Silicon Valley Bank. Such intervention on a large scale would further fuel inflation, forcing the Fed to continue raising interest rates.
The safest course for many businesses and private citizens is to park their cash in short-term government bonds. Hal Goldberg
On Monday, your front page reported that billionaires and others with their money in Silicon Valley Bank would get a free-lunch bailout.
The back page had an article on “food insecurity” and poor kids cut off from government lunch programs. My advice to poor kids: Hire the same lobbyists the banks use, and you’ll never go hungry again.
Or maybe we should enforce “bailout insecurity” on billionaires. Eric Alter Woodland Hills