The dark side of insuring all bank deposits: zombie banks

MarketWatch/Greg Robb/3-21-2023

“In light of concerns over more bank runs like the one on Silicon Valley Bank, commentators and government officials are discussing expanding the current $250,000 cap on deposit insurance or even insuring all bank deposits. But the proposal to insure all deposits strikes fear in the hearts of some bank experts for a simple reason: In the past, blanket insurance has led to the emergence of ‘zombie banks.'”

USAGOLD note: The problem with bailouts has always been propping up bad banks. This article cites “blanket” FDIC insurance covering all deposits, but it is the Fed, in this case, that is providing across-the-board coverage through its latest iteration of quantitative easing – SVB being the prime example. Powell doesn’t need Yellen and the FDIC to deliver the goods.