> So they got exposure to the upside of the bank's risk, but were bailed out of the downside.
The fastest way to cure the risk of banks like SVB would be to make it illegal to pay interest on demand deposits and have those that want to earn interest to either purchase certificates of deposit or invest in some kind of mutual fund. There are hundreds of money market mutual funds that are safer than making an uninsured deposit at (read: loan to) a mid size commercial bank.
It would also be necessary to require all deposits to be insured and have banks pay appropriately risk adjusted deposit insurance premiums of course.
The fastest way to cure the risk of banks like SVB would be to make it illegal to pay interest on demand deposits and have those that want to earn interest to either purchase certificates of deposit or invest in some kind of mutual fund. There are hundreds of money market mutual funds that are safer than making an uninsured deposit at (read: loan to) a mid size commercial bank.
It would also be necessary to require all deposits to be insured and have banks pay appropriately risk adjusted deposit insurance premiums of course.