What are the knock-on implications of the rapid demise of Silicon Valley Bank?

Like Volcker over Continental Illinois, Powell pragmatically has chosen to make depositors whole. But what else can history teach us?

My latest for @ft

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www.ft.com/content/907c50c1-74e7-4547-8489-89e738c3c828

After the bailout of Continental Illinois, Volcker said at the FOMC:

“My bottom line is that we’ve run out of room for the time being for any tightening, given this [banking] situation.”

Within six months, the Fed cut rates by 50bps. Will BTFP offset this?

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"banks will be far more sensitive to the threat of deposit flight and pay up for funding, tightening financial conditions.

Such competition should push up sharply so-called “deposit betas” and banks’ NII crimped.

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"there could be some tough lessons for providers of so-called digital currencies, including stablecoins whilst plans for central bank digital currencies may also be kicked into the long grass
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Central bankers have been at pains to tell us to worry about the non-bank sector for hidden leverage. But what tripped us up is what is always at the centre of a banking crisis — an outsized exposure to a large asset class deemed to be low risk, in this case, rate risk on UST
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