Big banks get a big deregulation break, then get grounded by the Fed

Like getting the car on Friday night... Party at the branch. Bank stocks like JP Morgan and Citi rose Thursday on some loosened parental guidance from the FDIC (that's the government agency responsible for making you feel safe about depositing your cash). If your bank goes rupt, the FDIC's got you covered up to $250K per insured bank. With great deposit insurance, comes great responsibility...

• The FDIC supervises banks to make sure they're not being irresponsible with your $$$. Banks make money off your idle checking account dollars by investing them, often as interest-generating loans (that's kind of their MO).
• Loans are critical to the economy. All that cash isn't really just sitting in checking/savings accounts. It's fueling economic growth through loans.
• The FDIC just gave banks a big break: it'll allow them to invest inactive customer cash into venture capital — think an investment in a pre-IPO company like Airbnb. The FDIC also reduced the amount of cash that banks need to set aside as reserves for potential loan losses.

One step back, one step forward... This FDIC announcement rolls back the Volcker Rule, which was imposed after the '08 financial crisis. The goal was to ban the types of risky investments that led to big bank failures. Weakening the Volcker Rules gives banks a bit more freedom, but separately they also just got grounded:

• Hand over the Switch: The same day as the FDIC's allowance-boosting moves, The Fed ordered banks to stop stock buybacks until September. It's also banning banks from increasing dividend payouts to shareholders.
• Canceling Disneyland: The Fed determined the US' largest banks could lose $700B in a worst-case recession scenario. So it wants them to save that buyback and dividend money to ensure they could weather a bad economic storm (The Fed's not keen to bail out banks again).