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>Putting WFC in bankruptcy like fludlight proposes does not necessarily make customers lose money It should. Otherwise the rest of us are paying for it. "Cus

• pg314 10y ago
  > It should. Otherwise the rest of us are paying for it. No, WFC is solvent, so nobody has to pay for anything. In a bankruptcy, customers, the people depositing money in the bank, are first in line, then bondholders (first senior, then junior) and finally stockholders. Fludlight was proposing forcing WFC into bankruptcy as a punishment. Stockholders would lose all their money and bondholders lose part; customers would get their deposits back, I imagine. > If the bank fails to pay you back, that's your problem, is it not? In a free market, yes. But fractional reserve banks in a free market are vulnerable to bank runs because they engage in maturity transformation (borrow short, lend long). That is an unstable situation: an unsubstantiated rumor can start a bank run which would lead to a collapse of the bank. To remedy that, the government usually guarantees deposits up to a certain amount (in the US, FDIC guarantees up to $250,000).
  • forgetsusername 10y ago
    And when the government guarantees the deposits, who pays? Us.