Who says the Fed can only fix one problem at a time?

Plus: Trump's legal jeopardy. [Bloomberg]( Follow Us [Get the newsletter]( This is Bloomberg Opinion Today, an early-spring picnic basket of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - The Fed can [fight inflation and fix the bank crisis](. - California’s water table [needs more atmospheric rivers](. - Luxury [doesn’t love a banking crisis](. The Fed Can Walk and Chew Gum at the Same Time With critics of the US Federal Reserve blaming its interest-rate increases for the banking crisis, the central bank is coming under increasing pressure to sacrifice its monetary-policy goals at the altar of financial stability. But this is a false choice, writes Bill Dudley, arguing the Fed can and should [fight inflation and contagion at the same time](. We’re not reliving the panic of 2008. The largest banks are more resilient now and have bigger capital buffers. That’s why deposits have been flowing toward them. Households and businesses are in better financial shape, not least because of the huge fiscal transfers during the Covid pandemic. And there’s no housing bubble. As a result, credit markets aren’t nearly as unhealthy as they were in 2008. The biggest problem for most banks is the prospect of taking losses on long-term bonds, a manageable risk. The Fed’s main task is to keep money flowing through the banking system — as it did last week, by accepting high-quality bonds at face value as collateral for liquidity. By reducing risk and uncertainty, it can pursue the monetary policy most appropriate for the economy. That’s where it gets tricky. The recent pace of inflation suggests a steep rate increase at this week’s meeting would usually be appropriate, but amid the current crisis it could be reckless. Cutting rates when inflation remains high could signal panic. The choice may come down to a pause or a small rate increase. Whatever its decision, the Fed’s priority should be to quickly calm the turmoil so it can safely pursue the right monetary policy. Bonus banking reading: - The lesson to banks from the Credit Suisse rescue: If you’re big enough, [the government will have your back](. — Bloomberg Editorial Board - We’ve been preparing for this crisis; [it won’t wreck the economy](. — Tyler Cowen - Hold the schadenfreude: Silicon Valley Bank customers [aren’t all swaggering “Tech Bros.”Â](— Joanna Strober - While SVB was loading up on high-risk mortgage securities, [M&T Bank was a more cautious](. — Marc Rubenstein California’s Glass Is Half Empty Readers with elephantine memory will recall that this space in yesterday’s newsletter carried the headline, “California’s Glass Is Half Full.” That was because, as Liam Denning argued, the heavy rains and snow that have lashed the state recently [could mean fewer blackouts]( come summer. Today, Mark Gongloff argues (and, I might add, just as persuasively) that the precipitation, excessive as it has been, [has barely replenished the state’s groundwater](.   Mark likens California’s recent water windfall to somebody getting a big tax refund after years of dipping into their retirement plan to pay the bills. The groundwater is the 401(k), and it is alarmingly depleted. The so-called “atmospheric rivers” that have washed over the state will go only a little way toward making up lost ground. “It will take several years, or even decades, of normal or above-average conditions, combined with appropriate management actions, to counter the decades of depletion of our groundwater resources,” the state’s Department of Water Resources wrote in its latest groundwater report. So California will need to do a better job of saving its water windfall, while simultaneously reducing demand. It will take political will on the part of Governor Gavin Newsom and the state legislature to make the tough calls needed to shore up California’s 401(k). Telltale Charts Banking crises tend to be [a bad look for the likes of Louis Vuitton and Gucci](, writes Andrea Felsted.  High-end shoppers reined in their spending after the 2008 financial crisis and, more recently, after China’s crackdown on conspicuous consumption in 2015. The current crisis exploded when the luxury sector, boosted by China’s reopening, was leading the broader market. Even before recent events, investors expected demand in both Europe and the US to moderate. Now there’s a risk of a harder landing for the sector — unless, of course, Chinese shoppers come to the rescue. Further Reading Donald Trump’s likely indictment over a sex scandal [gives Ron DeSantis an opening](. — Joshua Green The scale of the climate challenge shouldn’t blind us to [the immensity of what’s been achieved](. — David Fickling What Ukraine’s Zelenskiy should say [if Xi Jinping offers to broker peace with Russia](. — Andreas Kluth American oil companies will need strong nerves [to match their European peers in trading oil and gas](. — Javier Blas Brazil’s Lula [should offer a viable business plan]( to farmers and ranchers who live off the Amazon rainforest. — Eduardo Porter A [new schizophrenia drug]( promises to improve sufferers’ symptoms without the side effects. — Lisa Jarvis Even after their deal, Iran will have plenty of opportunity [to humiliate Saudi Arabia](. — Um, that would be me ICYMI Tim O’Brien’s [Crash Course podcast](: What is Putin thinking, more than a year after invading Ukraine? It’s best to [read up on the “Minsky moment”]( before we have one. Britain’s reliance on foreign workers [has grown since Brexit](. What do Trump’s legal troubles [mean for his 2024 candidacy?]( These are the [world’s most expensive cities for business trips](. Candida Auris: The [deadly fungus is sweeping across the US](. Kickers Can’t bear it: [Hong Kong says boo to Pooh](. Green, green grass of home: [Painted lawns are a thing](. Clutter stedda glitter: [Satellites are blocking the view](. Here comes the sun: [Solar debris incoming](. Notes:  Please send fresh fruit or rotten eggs to Bobby Ghosh at aghosh73@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. 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