Regional bank stocks rallied, but it's important to understand what this moment means: the end of market discipline in U.S. banking.
Translation: Depositors needn't worry about the safety and soundness of banks.
Why does she feel the need to provide this assurance if "The situation is stabilizing, and the U.S. banking system remains sound," as she claimed? Perhaps because bank depositors and investors fear the trouble in banks is wider than she claims.
The current panic has shown that none of those exist in the U.S. Risk-weighted capital standards have made banks look healthier than they are.
The Dodd-Frank regulatory architecture failed to protect against the interest-rate risk that landed Silicon Valley, Signature and First Republic banks in trouble.
Market discipline fell sharply with the creation of too-big-to-fail banks as part of Dodd-Frank.
Large depositors will be less likely to spread their cash across multiple banks.
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