Silicon Valley Bank’s failure led to several of the largest bank failures in American history, prompting government intervention to prevent widespread contagion. A mark-to-market analysis of American banks’ balance sheets reveals that many are illiquid but not yet insolvent. The government could require banks to raise capital through equity in order to prevent another widespread bank bailout.
For more information, visit the PolicyEd page here: https://www.policyed.org/policy-stories/market-test-avoid-another-government-bank-bailout/video
Additional resources:
Read “Monetary Tightening and U.S. Bank Fragility in 2023: Mark-to-Market Losses and Uninsured Depositor Runs?” by Erica Jiang, Gregor Matvos, Tomasz Piskorski, and Amit Seru via SSRN. Available here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4387676.
Read “U.S. Bank Fragility to Credit Risk in 2023: Monetary Tightening and Commercial Real Estate Distress,” by Erica Jiang, Gregor Matvos, Tomasz Piskorski, and Amit Seru via SSRN. Available here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4413799.
Read “Resolving the Banking Crisis,” by Peter DeMarzo, Erica Jiang, Arvind Krishnamurthy, Gregor Matvos, Tomasz Piskorski, and Amit Seru via ProMarket. Available here: https://www.promarket.org/2023/04/20/resolving-the-banking-crisis/
Watch “Does Government Debt Matter Anymore?” with John Cochrane on PolicyEd. Available here: https://www.policyed.org/perspectivesonpolicy/does-government-debt-matter-anymore/video.
Watch “Crony Capitalism: Lessons from the Great Recession,” with John Taylor on PolicyEd. Available here: https://www.policyed.org/policy-stories/crony-capitalism-lessons-great-recession/video.
– Subscribe to PolicyEd’s YouTube channel: http://bit.ly/PolicyEdSub.
– Follow PolicyEd on Twitter: http://bit.ly/PolicyEdTwit.
– Follow PolicyEd on Instagram: http://bit.ly/PolicyEdInsta.
