By John H. Cochrane via The Hill
John Cochrane writes that the recent bailout of large depositors of Silicon Valley Bank demonstrates that the banking regulation system is fundamentally broken and has provided perverse incentives for financial institutions to take enormous risks at what is ultimately the taxpayer’s expense. As an alternative to the current system, Cochrane recommends that banks funnel all deposits and short-term debts into interest-paying reserves at the Fed and short-term Treasury investments. Such a policy, he argues, would end bank runs and ensure that there would always be money to satisfy depositors.