SVB shows that there are few libertarians in a financial foxhole
From a Libertarian perspective why would we not:<p>1) have Congress+FDIC create a new form of deposit insurance that goes up to 10-25 million dollars[1] that is to be used for a new form of account legally dedicated to payroll; funded by a new set of fees since the private market clearly is not handling this issue well (Everybody knows about FDIC limits, and people who spend more than a fraction of time thinking about the risks can easily find out about third-party insurance and (newer) banking services that bundle your capital to multiple banks. )<p>2) impose interest rate stress tests against banks with much smaller amounts of capital (not the current $250 billion threshold which must mean only the top 10 banks are subject to it?) (Something that SVB lobbied to keep itself exempt from having to do, and avoided the expense of keeping its interest rate hedges up to date the last ~18 months, leading to their collapse.)<p>If you don&#x27;t like one of those, then why not address a bit more of the root cause why businesses only do business with one bank:<p>3) require banks legally to not impose exclusive deposit conditions or benefits as a condition of granting loans (ie banks pressuring in any way their lendees to use their deposit services)<p>The recently revealed sort of moral-hazard&#x2F;grey-area &quot;backstop-all-deposits-but-only-for-critical-situations&quot; is really anti-competitive if we don&#x27;t address it.  It ensures that startup&#x2F;SMB business owners, unclear of whether their &gt;250&#x2F;500k deposits are fully protected or not, will want to move cash to the very biggest &quot;too-big-to-fail&quot; banks just so they don&#x27;t have to financially architect around the cash flow risks.  (Cash flow risks are the #1 cause of failure of small businesses.)<p>I would much rather have 1000+ banks in our ecosystem than 10; surely that is a more robust system.<p>To me, guaranteeing all deposits (not just 250&#x2F;500k or even 10 million) is another form of moral hazard where banks &quot;privatize the gains, socialize the losses&quot;;  But I think the payroll risk is a systemic societal risk that makes sense for us to develop a societal framework to protect.<p>[1] 250 employees at 250k each is a monthly payroll of $5 million. 6 months payroll is 30 million. If you&#x27;re bigger than that, you have enough time&#x2F;resources to put your eggs in more baskets and manage the complexity. I think I am being very generous here.