Matt Levine’s Money Stuff: First Republic Calls In a Favor

First Republic

I mostly think of the Federal Deposit Insurance Corp. as a US government regulator that provides a government backstop on bank deposits. If a bank fails, the government — the FDIC — will come in and take it over and pay out all depositors (up to $250,000 each) with government money. This backstop is what makes bank deposits safe, what makes them money: An FDIC-insured bank account has no credit risk, because it is backed by the US government’s ability to print dollars.

There is another way to think about it, though, which is that the FDIC is a ...