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Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

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Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#551

Post by selimthegrim »

ProjectArcturis wrote: post #511
hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

Unlimited FDIC insurance has been the unofficial rule for some time now. No depositor has lost money since 1933, not even when Lehman went bankrupt.

IndyMac depositors lost money IIRC

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#552

Post by MichaelMoser123 »

hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

> Yellen has just broadcast that FDIC insurance is essentially unlimited

This is like a hotfix.

I don't think that the pile of money is unlimited - all bets are off if something happens to a big bank.

Or they stop raising interest rates, and then inflation goes up. Don't know how the banks will cope (or anyone else for that matter...)

I guess the banks know that, so they may be afraid to take up new risks in the near future.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#553

Post by tomato_123 »

FpUser wrote: post #538
hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

>"At the same time, this is yet another example of changing the rules in the middle of the game. Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy." Rules exist to serve a purpose. If one risks fucking up the economy with the only goal that the rules are preserved - it could end up with pitchforks.

Not bailing out some VCs who hold equity in these depositor-companies would not fuck up the economy. Completely absurd and outrageous.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#554

Post by IAmGraydon »

NotACop182 wrote: post #150
323 wrote: post #135

All bank deposits should be guaranteed by the state. Just like tap water is guaranteed to be drinkable, ... Bank accounts are the basis of many things.

Maybe banks shouldn't be able to place bets with depositor funds.

They were returning interest to the depositors, so actually the depositors decided to take on the risk. You will never earn interest without risk. If you're told that any form of interest is risk free, it's not true. In the case of treasuries, the risk is not default - it's inflation risk. This is because there is a chance that inflation outpaces the bond yield, meaning you lose money over the life of the bond (as the principal will lose buying power) and the underlying bond will also lose it's value as higher yielding bonds are auctioned by the government.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#555

Post by FpUser »

gizmondo wrote: post #317
bradleyjg wrote: post #160

So depositors at banks taking on big risks get elevated interest rates or other perks for years, and when the shit hits the fan depositors that put their money in prudent banks get to bail them out through higher fees. And people wonder why turnout is low. There’s no way to vote for non captured politicians.

Actually a lot of depositors would be happy with a narrow bank that takes no risk, just holds the money at the Fed. But the Fed decided it's too safe so narrow banking is essentially banned. Seems fair if they ensure safety of deposits in return.

I am in Canada so not sure how it compares to the US.

But yes, I'll sign for a Full-reserve banking if I had a choice. I've already invested in my own company. I have no desire for a bank sending my money elsewhere. Especially since the interest rate they pay to a person is laughable.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#556

Post by IAmGraydon »

Dem_Boys wrote: post #493

With this news, I'm opening a bank. Here is my business plan: 1. Make risky investments and offer better terms than other banks 2. Watch business flock to me 3. Get filthy rich on yearly bonuses 4. 10 years later my risky investments blow up (Make sure to sell stock before) 5. Get taken over by the FDIC 6. Don't return those years of bonuses 7. Let other banks pay for my wrongdoing with a "special assessment" 8. Walk…

This is really the typical arc of a hedge fund far more often than banks.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#557

Post by isignal »

hizanberg wrote: post #294
bradleyjg wrote: post #160

So depositors at banks taking on big risks get elevated interest rates or other perks for years, and when the shit hits the fan depositors that put their money in prudent banks get to bail them out through higher fees. And people wonder why turnout is low. There’s no way to vote for non captured politicians.

We banked at SVB and got 0% interest, it was just the bank recommended for Startup’s to use. It seems the risk was not choosing a top 3 bank since no one can survive a Bank Run and the largest banks are too big to fail. Which is terrible for competition if everyone’s essentially forced to use a top 3 bank just to have confidence for your money in a US Bank to be safe.

Did you consider buying us treasuries instead?

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#560

Post by insane_dreamer »

It's the right move. If they didn't do it, every regional bank, especially those that primarily deal with businesses (which are likely to have more than $250K in deposits), would be at risk, since the expectation is that your "money is safe in the bank" is what allows the banking system as it is to exist.
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