[tomato_123]

He is (likely self-interestedly) angling for a system-wide guarantee on uninsured deposits.

He's pretending something like this is true: SVB's failing will have a contagion effect on other banks (though some mechanism that he doesn't explain or have evidence for, although guys like him menacingly gesture towards MBS or something to remind us of 2008, even though it's completely different). By stopping the SVB run, we'll nip this contagion in the bud. There's some merit to this argument.

However, there's really no reason whatsoever to think that SVB's failing will have some causal impact on other banks' liquidity/solvency. To the extent that other banks are in trouble, it's because they have long duration assets that lost value when rates rose. Whether SVB survives or not has no impact on that. So the only mechanism through which an SVB bailout has any effect is through sending the implicit signal that the government will bail out all uninsured depositors.

[digitaltrees]

Even if it doesn’t create contagion it may wipe out a generation of start ups and destroy trillions of dollars of value that will be created in 10 years, destroying the most valuable ecosystem the world has ever seen and all just at the time AI is about to lead to the next revolution and economic transformation.

Given these implications, the policy choices are easy. Why allow these long term consequences in the name od stiffing depositors?

[tomato_123]

Calm down. No it won't. We have financial markets. Good startups/innovations will get funding elsewhere. This is already happening. The current equity holders will lose a bit. No big deal.

[digitaltrees]

Urgency is warranted when indecision is an accelerant to a fire. Capital markets in the US are dysfunctional and getting worse. Banks don’t lend to small business in any meaningful amount. Going public takes forever. And if you think there is any financial institution except the Fed that could move fast enough to prevent every SVB client company from missing payroll, I would love to know who and how you know they could and would act.

[panarky]

> though some mechanism that he doesn't explain

I believe the mechanism he's talking about is that large, uninsured depositors will wire funds out of regional banks that are "small enough to fail" to more diversified national banks that are designated "systemically important banks", which means they're too big to fail.