I guess what I am really saying between Yellen's carefully worded statement and Summer's hand wringing about 'contagion/extinction/whathaveyou' event and is that this action is very easy to defend on merits despite being very unpopular. I would hate to have to make this decision and I remember being pissed off in 2008 ( while technically being an indirect beneficiary of that policy ).
But even your counter can be addressed. Future risk is something that can be addressed once SVB is stablized and contagion contained. On the other hand, unrest following multiple startup blowup is a lot less predictable.
The question becomes: which risk is worse ( potential risky behavior later vs contagion now ). Immediate risk seems worse to Yellen and her friends. I personally disagree, but I have no power over those decisions so I can relatively easily rely on principle. I wish I could claim I would do differently were I in her shoes.
> Future risk is something that can be addressed once SVB is stablized and contagion contained. On the other hand, unrest following multiple startup blowup is a lot less predictable.
We had exactly the same arguments during the last bailouts. The future of back then is today.
True AND the results were major adjustments to the regulatory regime to banks. Without going into politics too much, banks successfully lobbied congress to relax those rules for banks of 50b size. In fact, SVB president argued for it in front of congress as part official testimony.
So.. actions were taken. Regulations mostly worked until they got lifted.
But even your counter can be addressed. Future risk is something that can be addressed once SVB is stablized and contagion contained. On the other hand, unrest following multiple startup blowup is a lot less predictable.
The question becomes: which risk is worse ( potential risky behavior later vs contagion now ). Immediate risk seems worse to Yellen and her friends. I personally disagree, but I have no power over those decisions so I can relatively easily rely on principle. I wish I could claim I would do differently were I in her shoes.