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The FDIC is more a feel-good measure: >"Currently, the Deposit Insurance Fund (DIF), which is a fund set aside to cover the insurance obligations of the FDIC,

by nonbel 7y ago

The FDIC is more a feel-good measure: >"Currently, the Deposit Insurance Fund (DIF), which is a fund set aside to cover the insurance obligations of the FDIC, has a required reserve ratio of only 1.35%. And that is only after a decision was made in October of 2015 to raise it, from its original level of 1.15%. Even more daunting, the DIF has until 2020 to reach this new 1.35% required reserve level. This means that, using the newly designated 1.35%, the DIF is only required by law to have $3375 on hand for every $250,000 it is currently insuring. Feeling secure? And, sadly, the reality is even less reassuring. On a macro scale, the FDIC currently “insures” $10.8 trillion of deposits, yet the DIF only has $52 billion of actual cash with which to insure that massive amount of money. Quite a massive shortfall, and well below the measly 1.35% that it is required by law to maintain." http://www.escapeartist.com/assetprotection/what-does-fdic-insured-really-mean/ http://www.escapeartist.com/assetprotection/what-does-fdic-i... In the end the fed can print the dollars too, at the expense of inflation... but who knows what schemes they have come up with.

lenticular 7y ago
The government is able to issue debt.
JumpCrisscross 7y ago
> The FDIC is more a feel-good measure No, it isn't. If the FDIC busts, the government would step in to back it up. Moreover, the FDIC's oversight keeps bank failures to a tiny fraction of the alternative, which we can now measure in the massive rates of fraud and failure around cryptocurrencies.
- nonbel 7y ago
  The FDIC and other schemes to intervene in the case of bad banks allows banks to get so huge they can't be allowed to fail. Then everyone needs to pay for the idiots who put their money into bad banks. In fact, it becomes smart to put your money in these poorly run banks since they will make more money on riskier activities but get bailed out when the same fail... Many people are dissatisfied with this situation.
  - JumpCrisscross 7y ago
    > Many people are dissatisfied with this situation As am I. But the carnage in cryptocurrencies is a reminder that the status quo beats anarchy or random stabs in the dark. A human tendency with inefficient systems is to throw out the baby with the bathwater. There are reasonable discussions to be had around reforming and renewing the FDIC to be more friendly to new entrants.
    - nonbel 7y ago
      >"As am I. But the carnage in cryptocurrencies is a reminder that the status quo beats anarchy or random stabs in the dark." The situation with bad cryptocurrency exchanges failing does not remind me of that at all. It is far superior since only the people who leave their money in the bad exchanges get punished. Under your preferred system I get held hostage even though I can see clearly something is wrong.
ceejayoz 7y ago
> the DIF is only required by law to have $3375 on hand for every $250,000 it is currently insuring This is a silly thing to complain about. Surely you don't think your car/home insurance company keeps the cash value of all the property they insure on hand? They keep a tiny fraction of what they've insured, to cover the tiny fraction that gets claimed as a loss in an average year.

by nonbel 7y ago

lenticular 7y ago

The government is able to issue debt.

JumpCrisscross 7y ago

> The FDIC is more a feel-good measure No, it isn't. If the FDIC busts, the government would step in to back it up. Moreover, the FDIC's oversight keeps bank failures to a tiny fraction of the alternative, which we can now measure in the massive rates of fraud and failure around cryptocurrencies.

nonbel 7y ago
The FDIC and other schemes to intervene in the case of bad banks allows banks to get so huge they can't be allowed to fail. Then everyone needs to pay for the idiots who put their money into bad banks. In fact, it becomes smart to put your money in these poorly run banks since they will make more money on riskier activities but get bailed out when the same fail... Many people are dissatisfied with this situation.
- JumpCrisscross 7y ago
  > Many people are dissatisfied with this situation As am I. But the carnage in cryptocurrencies is a reminder that the status quo beats anarchy or random stabs in the dark. A human tendency with inefficient systems is to throw out the baby with the bathwater. There are reasonable discussions to be had around reforming and renewing the FDIC to be more friendly to new entrants.
  - nonbel 7y ago
    >"As am I. But the carnage in cryptocurrencies is a reminder that the status quo beats anarchy or random stabs in the dark." The situation with bad cryptocurrency exchanges failing does not remind me of that at all. It is far superior since only the people who leave their money in the bad exchanges get punished. Under your preferred system I get held hostage even though I can see clearly something is wrong.

ceejayoz 7y ago

> the DIF is only required by law to have $3375 on hand for every $250,000 it is currently insuring This is a silly thing to complain about. Surely you don't think your car/home insurance company keeps the cash value of all the property they insure on hand? They keep a tiny fraction of what they've insured, to cover the tiny fraction that gets claimed as a loss in an average year.