Note on Money Stuff: SVB Took the Wrong Risks via Matt Levine

But I think the modern bank-regulatory view is that the point of a bank deposit is that you shouldn’t have to worry about it , and that it is a failure of bank regulation if depositors of any size have “to actually give a moment’s thought to the riskiness” of a bank. (Bank deposits are meant to be “ information insensitive .”) There are vast areas of life where we don’t worry about moral hazard. We don’t say things like “the moral hazard of food safety regulation is that we’ve greatly reduced the incentive for consumers to give a moment’s thought to the riskiness of their supermarket’s supply chain.” That’s not a thing you’re supposed to think about!

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FROM:

Matt Levine

Money Stuff: SVB Took the Wrong Risks