The government has announced steps to increase protection for bank creditors, and though I support the general thrust of the moves, they present substantial issues and unintended consequences.

I believe the FDIC should use its emergency powers to declare that during the current crisis it will handle bank failures in a manner that will protect all general creditors of banks (with a fraud exception). This is the simplest and most effective way to calm financial markets and maintain stability of funding in the banking industry.

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