I'll ask the obvious question, because I have no clue about this stuff. The early failures in 2008 seem to have been followed by a cascade of smaller failures. Is that going to happen again?
Right now we're dealing with the psychology of markets, if a large enough group of people get scared and want their money out, there's no amount of assurance that can stop that. They will only be appeased once they know their money is safe with them.
Even officially denied rumors can be true. See FTX ensuring panicking users that they were very much liquid, days (hours?) before they announced bankruptcy
Well, no, people were saying “Get your money out of SVB if its above the insurance limit”, because the run was already happening and that SVB couldn’t handle the run was a pretty widespread opinion.
But, while there are systemic/institutional/regulatory reasons why SVB’s conduct which created the vulnerability was possible, it doesn’t seem that the vulnerability itself is systemic in a way which makes other similar failures likely to be imminent.
Or withdrawing entirely from niche/smaller banks and into bigger/more diversified ones?
(diversified banks are great because payday becomes mostly book entries instead of massive inflows/outflows on payday)
I’d expect big orgs to mostly have money in banks specifically for reasonable cash needs (or temporary inbound flowthrough), and to have it in treasuries or other assets otherwise, but I wouldn’t expect to see much change. There’s no news here impacting accounts in other banks: the $250K insurance limit isn’t news, and there’s no reason to think that SVBs particular concentration of assets in long-maturity illiquid assets that have lost value is systemic rather than sui generis.
The ripple effects that will occur, I would think, will be more through companies that were dependent on SVB than companies with money in other banks.
Can't they?
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.