[resource0x]

I'm very curious about the bailout criterion. They can't set the rules individually for each "problematic" bank. Whatever formulation they come up with, will be immediately abused by creative financial engineering, so the problem will soon re-emerge in a different, totally unexpected shape.

[dragonwriter]

> They can’t set the rules individually for each “problematic” bank.

Most past bailouts have been sui generis actions with rules adopted for individual or small numbers of institutions currently in trouble, not forward-reaching “rights” that future actors could exploit. So I don’t see why you characterize this as impossible here; if there is any bailout beyond regular FDIC process, the most likely case would be a unique specific plan for this institution that creates no general rule that anyone else could force the government to use in the future.

[resource0x]

This "future" will arrive the very next day wrt another bank under the same type of stress, and then the next... Ad-hoc action for SVB might aggravate the situation.

[humanizersequel]

>They can't set the rules individually for each "problematic" bank.

Can't they?

[resource0x]

In principle, they can do whatever they want, but they already know SVB is not the only problematic bank - there's a whole pipeline of them; inventing individual bailout protocol for each would look ridiculous. My bet is that Fed's PhDs are desperately looking for a formula as we speak. That won't be easy. :-)