Systemic Risk Exception

Systemic risk exception is the source’s legal-policy frame for allowing an extraordinary bank-resolution response when ordinary treatment of a failed bank could threaten broader financial stability. In Ron Conway, Founder, SV Angel: Silicon Valley Bank Crisis, Ron Conway says Ruth Porat helped gather precedent and legal arguments around the government’s ability to invoke such an exception during the Silicon Valley Bank weekend.

The page is source-scoped rather than a legal guide. The episode’s contribution is to show why a legal mechanism mattered operationally: a deposit guarantee had to be justified as systemic-risk containment, not as a discretionary favor to a named bank or a narrow startup constituency.

Key Claims

• Extraordinary deposit protection needs a public-interest theory beyond helping one bank’s customers.
• Evidence of possible spread to banks such as First Republic Bank strengthened the systemic-risk argument in Conway’s account.
• Startup Payroll Systemic Risk helped broaden the case from venture capital to employees and small businesses.
• Precedent from earlier financial crises mattered because the weekend decision needed a tested legal and policy pattern.

Connections

• Silicon Valley Bank, [[FederalDepositInsuranceCorporation|FDIC]], [[USTreasury|U.S. Treasury]], Federal Reserve, and Janet Yellen - institutions and policy actors.
• Ruth Porat, Ron Conway, Nancy Pelosi, and Barack Obama - source actors.
• Deposit Guarantee Crisis Response, Moral Hazard Contagion Tradeoff, First Republic Bank, and Accelerated Bank Runs - related concepts and bank-run context.