A TRILLION HERE AND A TRILLION THERE…: Silicon Valley Bank and Joe Biden’s $19 Trillion Monday.

One bird has flown, and that’s moral hazard, or the idea that bailouts only encourage the behavior that makes bailouts necessary. Don’t buy the claim that bank shareholders and CEOs are being taught a lesson. By guaranteeing all deposits, government actually makes banks an even more attractive source of funding for swing-for-the-fences bets by politically adroit, high-rolling bank entrepreneurs and executives.

This problem regulation will then try to solve by dictating which bets banks can make with customer deposits. Somehow the necessary clairvoyance is never found and bank failures keep happening. In a weekend, dispensed with has been a guardrail that served the economy well. As the title of a 1986 paper by the Chicago Federal Reserve Bank succinctly put it: “Uninsured deposits [are] a source of market discipline.”

Market discipline provides too few opportunities for corruption and grift.