This is not 2008

Developments over the past week have felt eerily familiar for those of us who followed the global financial crisis in 2008. Analysts argued in early 2008 that Bear Stearns' problems were a result of poor management and a failure to hedge risk. The spread of instability to a European bank (Commerzbank) was considered to be limited. Sound familiar? I've made the same arguments myself with respect to the collapse of Silicon Valley Bank and Credit Suisse in recent days. But for now, that is where the similarities end.

The financial instability we have experienced is a question of liquidity rather than solvency and policymakers have responded swiftly. There is no reason to assume that we are in a banking crisis. That said, banking is all about confidence. Just because we aren't in a banking crisis now does not mean markets can't create a self-fulfilling prophecy.

The banks...