In this Bloomberg piece, published today, Bill Dudley makes a compelling case against raising the FDIC insurance limit from the current $250,000 per account (learn more about FDIC coverage here).

First, Dudley recognizes the importance of protecting depositors who, he says, have “just two modes, complete inattention or total panic.” He also recognizes that bank runs can now happen with unprecedented speed due to social media, as we witnessed with Silicon Valley Bank and Signature Bank.

However, he points out that raising the FDIC limit would cause certain banking institutions to take on even greater risk and, through the process whereby all banks fund the FDIC, create a mechanism through which conservatively run institutions subsidize more risky banks.

Dudley therefore proposes an alternative where the Fed’s lender of last resort functions that were used in the 2008 financial crisis are expanded and made permanent. A bank would need to pledge sufficient collateral to the Fed to cover its uninsured deposits and, after assigning values to that collateral, the Fed would promise to make that bank's depositors whole.

Dudley says that the depositors will not run on the bank because they will know that each bank has provided the Federal Reserve with the collateral enabling it to always have cash that will meet its deposit requests.

But, I am not so sure that Dudley’s solution would deter anxious depositors from bank runs.

Well-capitalized banks will have no problems meeting the Fed’s collateral requirements and other banks would, as Dudley says, “face powerful incentives to change how they operate.” But is that really what we want? Our economy needs banks that operate aggressively and unconventionally.Especially in this day and age where we are moving across a climate tipping point, we need some subset of banks to take on risk that Chase, Wells or Bank of America will not take on. And, I do not think we want our entire financial system to be entirely concentrated in US Treasuries which, under Dudley's proposal is the security that each bank will basically wind up needing to provide as collateral to the FDIC (US Treasuries will have the highest collateral value).

In short, I think Bill Dudley makes some good points, but the biggest problem with the current environment is that uninsured deposits are being pushed into US Treasuries and the largest banks. We need solutions to the FDIC limits that are designed to backstop depositors at midsized and smaller banks, and to create a vibrant non-concentrated banking market in the US again.

A couple of months ago, I spent the day at a climate change conference at Columbia Business School, my alma mater. Columbia has more than a couple dozen professors, backed by scores of data scientists and McKinsey-type advisors using the latest supercomputers from Nvidia to plot of the impacts of climate change over across the planet.

The conclusions that these professors and data scientists are drawing are scary. They cannot be denied.The impacts of climate change are already here and the projections show further definitive, widespread and severe impacts on our climate and ecosystem over the next five years. The impact over the rest of this Century if we continue to pump carbon into the atmosphere could be catastrophic for human life on Earth.

As I looked at the attendees, it was clear who is funding all of Columbia’s research and who is benefiting from it. A few companies like Toyota and the major oil producers are still trying to use Ivy League research to tailor to their own climate-denying narrative, but the balance of Columbia’s participants are the country’s largest financial institutions.

These banks and insurance companies are using this research today to make key credit decisions – deciding which farms can survive a 30 degree change in temperature, which residential areas can survive the wildfires and rise in sea levels that are coming immediately, etc.

Their senior employees cannot consume this information without recongizing clear that Earth is at a turning point, and there are broader conclusions that need to be drawn and actions to be taken.

More than 18 months ago, I wrote an article indicating that the climate crisis could lead to a banking crisis. Schools like Columbia Business School are now giving them the raw data upon which they can stress test their exposures and see that it may even be too late to preserve their portfolios.

Brian Moynihan and Jamie Dimon have been going to Davos and speaking with climate leaders for years now. They are smart leaders and have said the right things to buy the time they need.

Their people now have the tools. Wind, water and solar are so cheap that they can still, if quickly and effectively deployed, save us and future generations from the worst outcomes. Studies at Stanford show that investments in these technologies have short and effective payback periods.

The time is now for them to direct their staffs to devote all of their resources to funding these technologies and to even abandoning of their most detrimental investments (banking syndicates have the power and the tools to close down the carbon projects they fund). Acting now is not only in the interests of the globe, but also their shareholders.

Today's FOMC statement says that the Fed is holding its target Fed Funds rate at 5% to 5.25%. The decision was unanimous among voting members.

While today's action marks the first Federal Reserve meeting in this cycle to end without a rate increase, the Fed is now decidedly hawkish. The committee sees more inflation than it did previously with the 12 month change in core inflation well above 4% and core PCE inflation (exclude food and transportation) closer to 5.50%. It also sees a tight labor market with low unemployment that is causing outsized wage inflation.

Chairman Jay Powell's statement says that the Fed remains very concerned that inflation remains on the high side of expectations. In addition to eroding purchasing power, inflation is undermining confidence in the economy and the burdens of higher prices are falling more heavily on the working and middle classes. The Fed's dual mandate requires that it achieve not only its maximum employment goals but also its price stability goals.

A majority of the members now see at least two more quarter point hikes this year. At least a few see three hikes and one committee member favors a full 1% increase before the end of the year.

Chair Powell said that further rate decisions will continue to be made meeting by meeting. A Fed pause today gives it time for more information to come in, but also gives troubled banks more time to work through the balance sheet and avoid more failures like Silicon Valley Bank and First Republic.

The hawkish message about further rate hikes may cause analysts to question whether we are going to get a soft landing or whether a recession is still coming in late 2023.

Bottom line: Believe the Fed when they say rates will be higher for longer. Prepare for still higher interest rates. We'll see still more competitive savings rates and CD rates in the second half of the year. We may also see a more difficult mortgage environment.