Lev Menand is an associate professor at Columbia Law School and a fellow at the Roosevelt Institute. Morgan Ricks is the Herman O. Loewenstein chair in law at Vanderbilt Law School.
On Sunday evening, in an effort to stem a damaging financial panic, the Federal Deposit Insurance Corporation (FDIC) overrode a $250,000 cap on deposit insurance set by Congress and committed billions of dollars to rescue uninsured depositors at two failed banks, including Silicon Valley Bank. The rescue required the treasury secretary, Janet L. Yellen, to invoke the “systemic risk exception,” which allows the FDIC to bypass the ordinary rules of bank failure when following them would have “serious adverse effects on economic conditions or financial stability.”
