[danans]

> If the savings and loan of Bismarck North Dakota fails, is the government bailing out the car lot owner and the wheat farmer and the home builder?

Yes, the depositors would get bailed out, but the bank itself would be sold for parts. That might constrain the way that retail deposits are allowed to be managed.

A start would be undoing the Trump administration's rollback of Dodd-Frank stress testing requirements for smaller banks [1]. It will probably also mean the FDIC will require more insurance on deposits. This will all hurt profitability of banks, and reduce risk for depositors.

1. https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...

[DubiousPusher]

> Yes, the depositors would get bailed out,

Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here.

[danans]

> Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here.

Yes, the special situation will likely become the new normal. There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration (with the help of many banking-industry-aligned Democrats) eliminated in 2018 for banks with < $250M in deposits, and there will be greater insurance required on deposits.

Just 4 years after that change, the lessons of 2008 will have to be relearned.

[DubiousPusher]

> There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration

Can't they just up the capitalization requirements and get the same effect with far less red tape and billable hours for consultants and lawyers?

[danans]

IANA-Economist, but I believe the reason that capitalization requirements aren't sufficient is because of the "Last Taxi Problem", described in this article:

https://www.clevelandfed.org/publications/economic-commentar...