The issue and risk with banking is counter-party risk.

SVB was focused on early-stage tech companies and I think there is reduced counter-party risk there. There were two things that caught SVB off guard as money stopped flowing through the system:

Because the customers of SVB are mainly companies, not consumers, I don’t know how the FDIC insurance covers depositors. I think because of the highly localised nature of their banking/customers (tech companies who rely more on equity investment than debt) that there may not be significant counter-party risks which domino through the economy. What we may see is “just” some comparatively wealthy software engineers who lose their job. Maybe some banks who have mortgages to these engineers come under pressure?

The bigger issue that’s more likely to cause systemic risk is commercial real estate. Loans and mortgage-backed securities tied to CRE are coming under pressure as rates have risen while vacancy rates have stayed high post-covid. If you can’t rent your space the value of your building drops. The landlords end up being squeezed through higher holding costs (much higher interest as rates rise) and their Loan to Value Ratios reaching levels which may breach debt covenants.

This area of banking system is more debt-based so more likely to have greater systemic risk, more counter-party risk as debtors fall like dominos. There will be assets (office buildings) that have been financed by multiple lenders, there will be smaller specialised lenders in the space who have large CRE loan books who are likely to have large tranches of their own funding being borrowing from larger institutions. Probably also entities who have CREIT assets on their balance sheets which will need to be written-down which will cause havoc etc etc

I think it’s a stretch to say US consumers move to US debt when SHTF. It’s commercial and international entities who move to US government debt because it’s seen as a safe-haven. That’s what happened in March 2020, everything tanked because everyone wanted US cash and US debt.

US CBDCs are supposedly still in trial phases, I think we are a while off them being launched and think it’s tangential to this chaos. I don’t think they’ll be presented as the answer to the current mess that’s unfolding. The “answer” to this current mess is likely to be some new form of QE and the kicking of the can further down the road.