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Wouldn't this just be the gov giving free money to the banks so they can pay?
by firekvz 7y ago
Wouldn't this just be the gov giving free money to the banks so they can pay?
- empath75 7y agoThey pay for insurance in case this happens.
- lugg 7y agoNo.. this only happens if the bank is bust.
- Scoundreller 7y agoGovernments have a long history of bailing out banks and other corps without zeroing their shareholders first.
- lugg 7y agoYes but these guarantees are only accessable in receivership.
- matt4077 7y agoNo. The money would come from the federal deposit insurance program, which is funded by the banks, not the government. The money would also be recovered over time, when the bank’s loans become due and other assets are liquidated.
- notahacker 7y agoIn general the money would come long before the FDIC get involved, because the role of the Fed (and other country equivalents) is ensuring that commercial banks can always borrow enough money to meet short term withdrawal requests if their loans aren't defaulting. Lending at n+x% because it can always borrow at currency at n% is a modern bank's business model. Needless to say this is quite different from having a business model where you don't have any right to borrow money and claim to be backing it 1:1 with actual dollars, but it turns out that the bulk of the not-necessarily matching amount of actual dollars you have is lent out to some other shady operation...