The US government will make a ‘material’ announcement today to shore up deposits at Silicon Valley Bank, according to a report from Reuters. The action is being taken to prevent a wider run on banks.
There are no details in the report beyond that.
There’s been plenty of ruminating about what should happen given that the $250K rules were well-known and that thousands of other firms and millions of people won’t be bailed out due to higher rates, but this is always what was going to happen.
Allowing bank runs is a dangerous game and there are already reports that Signature Bank and First Republic Bank are in dire straits. Who knows what would happen after that.
The question is now is: What does this due to the ultimate path of monetary policy? Sure, the Fed goes to 25 bps this month but putting a line under banks is inflationary, on net.