The Fed’s near-zero interest rate experiment was destined to have unintended consequences. Backstopping SVB’s collapse is just the first one

The move ends the immediate crisis; there’s no reason for depositors to pull their money from banks if the government is guaranteeing it. But the long-term implications remain to be seen. During the financial crisis, regulators made clear they would backstop all “systemically important” institutions, and significantly increased regulations on those large institutions as a result. Yesterday’s action extends that guarantee to big depositors at smaller banks. (Shareholders at SVB and Signature won’t be made whole.) If anyone thinks that won’t be accompanied by stepped up regulation on those banks, they are misreading history.

It was inevitable that the Fed’s decade-long experiment with near-zero interest rates would have serious unintended consequences. Count this as one of the first of those—a historic reframing of depression-era deposit insurance. We’ll let politicians and regulators argue over whether to call it a bailout, but it is a big change.

And another thing to watch: The Fed has made clear its determination to keep raising interest rates until it gets inflation under control. But fear of a financial crisis is the one thing that could shake that determination.

Other news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

TOP NEWS

SVB U.K. fire sale

All-night talks paid off early Monday when HSBC agreed to buy Silicon Valley Bank's U.K. arm in a deal reportedly hashed out by HSBC CEO Noel Quinn, Prime Minister Rishi Sunak, and the Bank of England. The sale keeps the U.K. government from having to intervene to protect depositors—SVB U.K. has 3,300 U.K. clients—and keeps taxpayers out of the matter altogether. Financial Times 

Saudi Aramco’s $161 billion year

Saudi Aramco, the largest energy company in the world, increased its dividend and announced plans to increase its spending as it looks to capitalize on last year's surge in oil and gas prices. The company reported a net income of $161 billion for the full year, a 46% increase from the previous year, which was largely attributed to the OPEC+ alliance raising production and the impact of Russia's invasion of Ukraine on oil markets. Bloomberg

The 70-hour work week

As companies around the world consider shortening their work weeks to four days, South Korea is going in the opposite direction, expanding its maximum work week to 69 hours, up from 52. Oddly, the government is pitching its a plan as providing greater flexibility, since workers will be able to bank more hours a week in exchange for longer breaks elsewhere in the year. Fortune  

AROUND THE WATERCOOLER

The first social media bank run? A newsletter popular with VCs may have been the domino that started the Silicon Valley Bank implosion by Steve Mollman

Why the banking system is safe despite the second-biggest bank failure in U.S. history, according to a finance professor by William Chittenden and The Conversation

‘I was burned out to the core.’ How 3 women took career breaks to reset their priorities by Alicia Adamczyk 

‘I’m even afraid to cut that grass, because what’s still left in the soil?’ East Palestinians still terrified of their town after toxic train crash by John Flesher and The Associated Press

Those trendy continuous glucose monitors? I’ve been wearing them for more than a decade. Here’s what I’ve learned by Erin Prater

This edition of CEO Daily was edited by Jackson Fordyce.