The End of Market Discipline for Banks

Janet Yellen essentially says all deposits are insured. From now on, moral hazard rules

WSJ editorial. Excerpts:

"Dodd-Frank lets the Federal Deposit Insurance Corp. guarantee uninsured deposits under its “systemic risk” exception.” But banks must fail for the exception to apply and the systemic risk is supposed to be genuine. Regulators stretched that exception with SVB and Signature, and the Treasury Secretary is now making clear that they will stretch it again to prevent more bank runs on her watch."

"Risk-weighted capital standards have made banks look healthier than they are. The Dodd-Frank regulatory architecture failed to protect against the interest-rate risk that landed Silicon Valley (SVB), Signature and First Republic banks in trouble. Market discipline fell sharply with the creation of too-big-to-fail banks as part of Dodd-Frank. Now Ms. Yellen is throwing out residual discipline by telling even uninsured depositors that they needn’t worry."

"Sen. Elizabeth Warren says no one should expect small businesses with more than $250,000 in cash to be savvy enough to know the difference between a well and poorly run bank"

"Sen. Elizabeth Warren says no one should expect small businesses with more than $250,000 in cash to be savvy enough to know the difference between a well and poorly run bank"