5 ms·

I guess you weren't around in 2008. Oh remember those securitized mortgages we sold you? Yeah, they're worthless now. By the way we bought insurance on them be

by imgabe 9y ago

I guess you weren't around in 2008. Oh remember those securitized mortgages we sold you? Yeah, they're worthless now. By the way we bought insurance on them becoming worthless, because we were pretty sure this would happen when we sold them to you.

Clubber 9y ago
There's a difference between keeping cash in a bank which is FDIC insured and putting money in investments; particularly in the US where robbery was/is called investment strategy.
- dumbfounder 9y ago
  Coinbase is FDIC insured.
  - will_brown 9y ago
    But do you know what that covers? Coinbase supports wallets for USD...is it only USD wallets that are FDIC insured?
  - snikeris 9y ago
    * Your USD wallet at Coinbase is FDIC insured.
    - dumbfounder 9y ago
      Yikes, that is indeed a very important distinction that I missed. https://support.coinbase.com/customer/portal/articles/1662379-how-is-coinbase-insured- https://support.coinbase.com/customer/portal/articles/166237...
  - wyldfire 9y ago
    Yes but it's important to note that the FDIC insurance is only for your USD-denominated balance. Your BTC (or all crypto?) balance is insured by Lloyd's. I assume this is only insured against thefts/failures of Coinbase's, so if your balance were stolen by attackers who had your Coinbase credentials I suspect your balance would not be covered. But this might be similar to your liability from normal online banking fraud/theft? The fact that Coinbase pays those private insurance premiums makes them the no-brainer suggestion to people who are considering holding some BTC.
- ddorian43 9y ago
  FDIC insurance is low, what, 200K ?
  - Clubber 9y ago
    Ya but you can have multiple accounts. I think that circumvents the limit. I think the limit was raised during the Bush administration, but not sure. >The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. https://www.fdic.gov/deposit/deposits/faq.html https://www.fdic.gov/deposit/deposits/faq.html FWIW, I think it should definitely be higher than $250K. Probably $10M or so.
    - deleted 9y ago
      [deleted]
    - TomMarius 9y ago
      In my country, the limit is per natural person, not per bank account. Legal persons don't get it (they get a different one though - because of this, there is a very important distinction between business and personal account).
    - Finnucane 9y ago
      The problem with raising the insurance is that banks pay for it, and the FDIC maintains a fund for paying out claims. If the amount at risk was higher, fees would have to be higher and the FDIC would have to keep an enormous amount of cash on hand. Hell, even at that level, the FDIC was badly stressed during the 2008 crisis. The point of the FDIC anyway is not to protect rich people from all losses, but to prevent runs on banks and promote stability in the system. Most depositors don't have that much money.
      - Clubber 9y ago
        Yes, but since commercial banks and investment banks were allowed to merge after 70 or so years, banks certainly have a lot more income than they used to.
- imgabe 9y ago
  Nobody is going to keep a billion dollars in a savings account, which FDIC insurance would not even come close to covering anyway.
  - tialaramex 9y ago
    Can you just loan your money directly to the US Government? In the UK the "National Savings & Investment" bank is actually outright owned and operated by the British government, specifically for this purpose. Instead of raising money commercially with a debt security, and then having banks buy that take savings from their customers to afford the securities and keep a cut as profit, the NS&I gets rid of the middle man and just borrows money directly from citizens at a decent interest rate with zero risk‡. ‡ Obviously the government itself might fail, but you're exposed to that risk anyway, so it didn't add any risk to involve NS&I here.
    - dragonwriter 9y ago
      > Can you just loan your money directly to the US Government? Well, you can buy, e.g., savings bonds directly, but only $25,000 worth per year.
      - jonknee 9y ago
        But there are lots of types of US bonds and you can literally buy as much as you want (~$500b worth of them trade every day), it's the most liquid market in the world.
        dragonwriter 9y ago
        Oh, yeah, I forgot that individuals can buy Treasuries directly from the government, I was thinking they only could on the secondary market which would not have been responsive to the query.
  - dragonwriter 9y ago
    > Nobody is going to keep a billion dollars in a savings account, which FDIC insurance would not even come close to covering anyway. If you spread it around 4,000 banks (there are 5,593, so this technically possible), it would, since the limit is $250,000 per depositor per bank per ownership category (I'm assuming avoiding the overhead of manipulating ownership categories, which could shrink the number of banks needed further.)
acdha 9y ago
Those were speculative investments, not bank accounts. Nobody lost money in an FDIC insured account. The comparison is also dubious for another reason: everyone who did even the tiniest bit of diligence knew the mortgage and derivative markets were in a huge bubble. Phrases like “liar loan” were common, they had to invent new ways to rate derivatives which didn’t meet the traditional standards, etc. but so many people were banking on the greater fool theory lasting long enough for them to cash out before it popped. All the crash proved was that the traditional banking standards were there for a reason and the people who never abandoned them were fine. This is relevant in the Bitcoin discussion because we see the same dynamic where people who pay attention to the fundamentals are saying it’s a bubble and the get rich quick crowd is saying that the rules are completely different now because magic.
- imgabe 9y ago
  It is relevant because the mantra of "traditional financial institutions have your best interests at heart, unlike those Bitcoin scammers" is demonstrably false.
  - acdha 9y ago
    That’s a rather blatant strawman: it’s literally a textbook example of the value of regulation and laws which make that happen, not the goodwill of bankers.
    - imgabe 9y ago
      You mean the laws and regulations written by lobbyists paid by the bankers? Do you mean the regulators who leave their Federal jobs for multi-million dollar per year jobs at the banks they formerly regulated? Are those the ones you're talking about? You seem to be implying that the regulations / laws and the banks are two separate entities. They're increasingly the same. Which means that yes, it is basically their goodwill we're dependent on, or more accurately how much they think they can get away with before there's literal blood in the streets.
      - 9y ago

by imgabe 9y ago

Clubber 9y ago

There's a difference between keeping cash in a bank which is FDIC insured and putting money in investments; particularly in the US where robbery was/is called investment strategy.

dumbfounder 9y ago
Coinbase is FDIC insured.
- will_brown 9y ago
  But do you know what that covers? Coinbase supports wallets for USD...is it only USD wallets that are FDIC insured?
- snikeris 9y ago
  * Your USD wallet at Coinbase is FDIC insured.
  - dumbfounder 9y ago
    Yikes, that is indeed a very important distinction that I missed. https://support.coinbase.com/customer/portal/articles/1662379-how-is-coinbase-insured- https://support.coinbase.com/customer/portal/articles/166237...
- wyldfire 9y ago
  Yes but it's important to note that the FDIC insurance is only for your USD-denominated balance. Your BTC (or all crypto?) balance is insured by Lloyd's. I assume this is only insured against thefts/failures of Coinbase's, so if your balance were stolen by attackers who had your Coinbase credentials I suspect your balance would not be covered. But this might be similar to your liability from normal online banking fraud/theft? The fact that Coinbase pays those private insurance premiums makes them the no-brainer suggestion to people who are considering holding some BTC.
ddorian43 9y ago
FDIC insurance is low, what, 200K ?
- Clubber 9y ago
  Ya but you can have multiple accounts. I think that circumvents the limit. I think the limit was raised during the Bush administration, but not sure. >The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. https://www.fdic.gov/deposit/deposits/faq.html https://www.fdic.gov/deposit/deposits/faq.html FWIW, I think it should definitely be higher than $250K. Probably $10M or so.
  - deleted 9y ago
    [deleted]
  - TomMarius 9y ago
    In my country, the limit is per natural person, not per bank account. Legal persons don't get it (they get a different one though - because of this, there is a very important distinction between business and personal account).
  - Finnucane 9y ago
    The problem with raising the insurance is that banks pay for it, and the FDIC maintains a fund for paying out claims. If the amount at risk was higher, fees would have to be higher and the FDIC would have to keep an enormous amount of cash on hand. Hell, even at that level, the FDIC was badly stressed during the 2008 crisis. The point of the FDIC anyway is not to protect rich people from all losses, but to prevent runs on banks and promote stability in the system. Most depositors don't have that much money.
    - Clubber 9y ago
      Yes, but since commercial banks and investment banks were allowed to merge after 70 or so years, banks certainly have a lot more income than they used to.
imgabe 9y ago
Nobody is going to keep a billion dollars in a savings account, which FDIC insurance would not even come close to covering anyway.
- tialaramex 9y ago
  Can you just loan your money directly to the US Government? In the UK the "National Savings & Investment" bank is actually outright owned and operated by the British government, specifically for this purpose. Instead of raising money commercially with a debt security, and then having banks buy that take savings from their customers to afford the securities and keep a cut as profit, the NS&I gets rid of the middle man and just borrows money directly from citizens at a decent interest rate with zero risk‡. ‡ Obviously the government itself might fail, but you're exposed to that risk anyway, so it didn't add any risk to involve NS&I here.
  - dragonwriter 9y ago
    > Can you just loan your money directly to the US Government? Well, you can buy, e.g., savings bonds directly, but only $25,000 worth per year.
    - jonknee 9y ago
      But there are lots of types of US bonds and you can literally buy as much as you want (~$500b worth of them trade every day), it's the most liquid market in the world.
      - dragonwriter 9y ago
        Oh, yeah, I forgot that individuals can buy Treasuries directly from the government, I was thinking they only could on the secondary market which would not have been responsive to the query.
- dragonwriter 9y ago
  > Nobody is going to keep a billion dollars in a savings account, which FDIC insurance would not even come close to covering anyway. If you spread it around 4,000 banks (there are 5,593, so this technically possible), it would, since the limit is $250,000 per depositor per bank per ownership category (I'm assuming avoiding the overhead of manipulating ownership categories, which could shrink the number of banks needed further.)

acdha 9y ago

Those were speculative investments, not bank accounts. Nobody lost money in an FDIC insured account. The comparison is also dubious for another reason: everyone who did even the tiniest bit of diligence knew the mortgage and derivative markets were in a huge bubble. Phrases like “liar loan” were common, they had to invent new ways to rate derivatives which didn’t meet the traditional standards, etc. but so many people were banking on the greater fool theory lasting long enough for them to cash out before it popped. All the crash proved was that the traditional banking standards were there for a reason and the people who never abandoned them were fine. This is relevant in the Bitcoin discussion because we see the same dynamic where people who pay attention to the fundamentals are saying it’s a bubble and the get rich quick crowd is saying that the rules are completely different now because magic.

imgabe 9y ago
It is relevant because the mantra of "traditional financial institutions have your best interests at heart, unlike those Bitcoin scammers" is demonstrably false.
- acdha 9y ago
  That’s a rather blatant strawman: it’s literally a textbook example of the value of regulation and laws which make that happen, not the goodwill of bankers.
  - imgabe 9y ago
    You mean the laws and regulations written by lobbyists paid by the bankers? Do you mean the regulators who leave their Federal jobs for multi-million dollar per year jobs at the banks they formerly regulated? Are those the ones you're talking about? You seem to be implying that the regulations / laws and the banks are two separate entities. They're increasingly the same. Which means that yes, it is basically their goodwill we're dependent on, or more accurately how much they think they can get away with before there's literal blood in the streets.
    - 9y ago