As in 2008, Ad Hoc Measures Spread Panic

Norbert Michel

More than anything, the actions of the U.S. government pertaining to the collapse of Silicon Valley Bank and the closing of Signature Bank demonstrate the need for calm and the rule of law. Congress long ago created a framework for dealing with bank failures, and the Federal Deposit Insurance Corporation (FDIC) is at the center of that framework. The FDIC has regularly demonstrated its ability to follow the law and resolve a failed bank, and that’s exactly what they should be allowed to do now.

It is improper for government officials to take it upon themselves to change the rules of the game in the middle of the crisis by, for example, ignoring the FDIC deposit insurance limit. These types of ad hoc actions by Treasury and the Fed are harmful. They arbitrarily pick winners and losers while sowing the seeds of further confusion and panic. The FDIC should be left to its job.