Economics/Class Relations

Bailing Out Uninsured Deposits Encourages Bank Runs

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THURSDAY, MARCH 23, 2023
I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it.
– Benjamin Franklin, “On the Price of Corn and Management of the Poor” [1776]

HORNBERGER’S BLOG
March 23, 2023

Bailing Out Uninsured Deposits Encourages Bank Runs
In the failure of Silicon Valley Bank and Signature Bank, U.S. officials decided to cover all the uninsured deposits in both banks — that is, deposits that exceeded the $250,000 insurance coverage of the FDIC. The belief was that failing to cover those uninsured deposits ran the risk that bank runs could spread to more banks. Covering those uninsured deposits was intended to …
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