The Politics of Bank Failures

Washington Post: “The move will likely ignite a political firestorm over the decision to protect the assets of tech firms, venture capitalists, and other rich people in California…”

“Claims that the decisions do not amount to a ‘bailout,’ however, are likely to be challenged. While the fund going to the depositors is paid into by U.S. banks, it is ultimately backstopped by the Treasury Department — and therefore U.S. taxpayers…”

Wall Street Journal editorial: “We may be the only people in the world who still worry about ‘moral hazard.’ But a nationwide guarantee for uninsured deposits, even for a limited time, means this will become the default policy any time there is a financial panic.”