"Too big to fail" is such a bullshit argument, and doesn't make it any less of a bailout at taxpayer expense. Finance is structured so that every time this happens, it just so happens to be a forced choice between a bailout and "nice economy you have there, it'd be a shame if something happened to it..."
> The bank doesn't exist anymore and its shareholders got nothing. The customers' reward is they can make payroll. What bailout?
Depositors knowingly took a risk by keeping more than $250K in an individual bank account. Rather than allow depositors to face the consequences of that decision, the government will now be making an exception to their own rule and covering depositors' losses. That's a bailout.
If a company would have been unable to make payroll because of this, it would have been a direct result of their failure to adequately assess and mitigate risk.
The word bailout seems to be getting redefined a bit here. The government is stepping in with short term funding to guarantee all uninsured bank deposits. This isn't a matter of another bank buying the failed SVB and the government acting as an arbitrator, the government is setting up the program and footing the bill until they can press the cost on to other banks.
This isn't a shareholder bailout and they say the bill ultimately won't sit on tax payers,but it's a bailout none the less.
edit: to clarify I don't mean it's being redefined by the parent post here, bailout is being redefined for the whole SVB situation to avoid using a term that people respond poorly to.
It seems to me that, just like just-in-time inventory control, we've chosen an economic model that maximizes growth but also incurs significant risks to stability.
And with a global economy, and global Internet, and social media giving everyone around the world an opportunity to escalate internal dissension, those risks are escalating.
> we've chosen an economic model that maximizes growth but also incurs significant risks to stability.
You mean the same economic system that has been in place since the industrial revolution?
Sure, the US tried softening it a bit during the aftermath of the great depression, but in the end, this is just a free market economic behaving as expected?
The one thing that keeps surprising me is the belief that the US seems to have in self regulation, which has failed time and time again?
That's a complete misunderstanding of JIT. If SVB were running according to JIT principles it would have matched the duration of liabilities (deposits) to the duration of assets (the bonds it held). In fact it held long-dated bonds, which is analogous to keeping a lot of inventory on hand for a high-throughput manufacturing process: the complete opposite of JIT.
