Yet the Dodd-Frank Act retained a loophole that allowed the government to support failing banks. With the bailout of depositors at the Silicon Valley Bank and Signature Bank, and with the use of taxpayer funds to facilitate their sale to other banks, we now know that selective bailouts will continue. Congress must go back to the drawing board and, once and for all, end the ability of regulators to rescue their most influential charges. …

FDIC chairman Martin Gruenberg confirmed to the Senate last week that he used the Dodd–Frank Act’s systemic-risk exception to bailout depositors at SVB and Signature and to facilitate a sale of those two banks, at a cost to taxpayers of about $22.5 billion, or almost $70 for every man, woman, and child in the country. He also noted that after these bailouts, depositors were moving their money into “systemically important banks.” Those depositors understand that the systemic-risk exception and the rule barring general deposit guarantees move the U.S. banking system closer to a too-big-to-fail standard than ever before.

[That’s because Dodd-Frank actively *promoted* too-big-to-fail outcomes. I and many others warned at the time that the new regulatory load from Dodd-Frank would overwhelm smaller banks and force them to sell to larger institutions as compliance costs became too high. It didn’t take long for that consolidation to take place, either. The talk now of vastly increasing FDIC coverage — and therefore insurance payments by member banks — will have the same effect. — Ed]