4 ms·

Are you pretending FDIC covers more than 1% of all deposits? If so, please refer to the Fed website for a sobering realization.

ceejayoz 4y ago
> Are you pretending FDIC covers more than 1% of all deposits? It doesn't have to cover all of deposits, it has to cover failures. The chances of every bank in the country simultaneously collapsing is slim (and you've got bigger problems at that point than your balance). No one's lost a penny worth of FDIC-insured funds since 1933.
- 0daystock 4y ago
  It's amazing how quickly we forget history, apparently ignoring the bank crisis of the 1980s and complete failure of FSLIC. Multiple banks collapsed costing tax payers billions of dollars and the institution the government created to insure deposits failed spectacularly.
  - ceejayoz 4y ago
    And the government stepped in to meet obligations to make depositors whole. The S&L industry collapsed, the folks with $100k of retirement savings in the bank did not. FSLIC got rolled into FDIC for a large insurance risk pool, too. They're not going to do that for Coinbase.
  - mumblemumble 4y ago
    It's worth pointing out that the collapse of the S&L industry is widely recognized as being largely a result of loosening of regulations in the 1980s. https://www.thebalance.com/savings-and-loans-crisis-causes-cost-3306035 https://www.thebalance.com/savings-and-loans-crisis-causes-c... Leaving aside the question of whether it's advisable to have the government in this business in the first place, I'd say we should at least agree that, if it's going to happen, financial institutions that benefit from these programs should be required to be absolutely allergic to risk. Letting firms make questionable loans and pocket the profits while passing the risk on to taxpayers has, as far as I'm aware, never worked out well in practice.
  - JumpCrisscross 4y ago
    > and complete failure of FSLIC. Multiple banks The S&L crisis involved S&Ls [1]. Not banks [2]. That was the problem. People making up non-bank “banks” and then blowing them up in the exact way the banking regulations they were looking to escape were written to avoid. Sound familiar? S&Ls were covered by FSLIC. It differs from the FDIC in an important way: it was not backed by the “full faith and credit” of the U.S. That makes it more like Sallie Mae than the FDIC. (Indeed, it comes out of [1] https://en.m.wikipedia.org/wiki/Savings_and_loan_association https://en.m.wikipedia.org/wiki/Savings_and_loan_association [2] Banks also failed. But they were resolved in an orderly way by the FDIC. Nothing there threatened to go systemic. https://www.fdic.gov/bank/historical/history/3_85.pdf https://www.fdic.gov/bank/historical/history/3_85.pdf
- Finnucane 4y ago
  Though the WAMU failure in 2008 nearly broke the FDIC. You know the cartoon of the snake eating the elephant? It was like that. Samll banks, on the other hand, fail every week and the FDIC cleans them up so fast no one even notices.
  - ceejayoz 4y ago
    The WAMU failure also serves as a pretty good example of the other levers available in traditional banking regulation (and the pressure on the government to find a fix) that Coinbase is unlikely to be able to avail themselves of.
    - Finnucane 4y ago
      The WAMU bankruptcy was difficult for the FDIC to manage, and there was no ready buyer to take the remains. But if there had been no FDIC to manage it, the result would have been catastrophic failure. Like Lehman, but with more retail banking customers getting wiped out.
      - polski-g 4y ago
        Congress would have given the FDIC a blank check if they needed.
        JumpCrisscross 4y ago
        > Congress would have given the FDIC a blank check if they needed Congress already did this. The FDIC reserve fund is mostly an accounting and accountability thing. The act creating the FDIC gives it the explicit backing of the United States’ “full faith and credit.”
  - thaway2839 4y ago
    So basically a massive worst case financial crisis led to something almost, but not actually, failing. Sounds like the system worked extremely well.
cguess 4y ago
The difference is that if you're putting more than $250k into a bank account the bank pulls you aside and discusses proper financial planning and investment. Or you're smart enough to know already what you're getting into. The FDIC protects retail investors, so even if a banks holdings are not 100% covered, the uncovered portions are for non-retail customers and other holdings, not your savings account.
JCharante 4y ago
Well it's $250k per depositor per bank, and you can have single and joint accounts which doubles it. You can have more than a million that is FDIC insured, and that's good enough for most people, and if you lose your money beyond that then to be honest people don't need more than a million to still live a comfortable life that you can "restart" from.

ceejayoz 4y ago

> Are you pretending FDIC covers more than 1% of all deposits? It doesn't have to cover all of deposits, it has to cover failures. The chances of every bank in the country simultaneously collapsing is slim (and you've got bigger problems at that point than your balance). No one's lost a penny worth of FDIC-insured funds since 1933.

0daystock 4y ago
It's amazing how quickly we forget history, apparently ignoring the bank crisis of the 1980s and complete failure of FSLIC. Multiple banks collapsed costing tax payers billions of dollars and the institution the government created to insure deposits failed spectacularly.
- ceejayoz 4y ago
  And the government stepped in to meet obligations to make depositors whole. The S&L industry collapsed, the folks with $100k of retirement savings in the bank did not. FSLIC got rolled into FDIC for a large insurance risk pool, too. They're not going to do that for Coinbase.
- mumblemumble 4y ago
  It's worth pointing out that the collapse of the S&L industry is widely recognized as being largely a result of loosening of regulations in the 1980s. https://www.thebalance.com/savings-and-loans-crisis-causes-cost-3306035 https://www.thebalance.com/savings-and-loans-crisis-causes-c... Leaving aside the question of whether it's advisable to have the government in this business in the first place, I'd say we should at least agree that, if it's going to happen, financial institutions that benefit from these programs should be required to be absolutely allergic to risk. Letting firms make questionable loans and pocket the profits while passing the risk on to taxpayers has, as far as I'm aware, never worked out well in practice.
- JumpCrisscross 4y ago
  > and complete failure of FSLIC. Multiple banks The S&L crisis involved S&Ls [1]. Not banks [2]. That was the problem. People making up non-bank “banks” and then blowing them up in the exact way the banking regulations they were looking to escape were written to avoid. Sound familiar? S&Ls were covered by FSLIC. It differs from the FDIC in an important way: it was not backed by the “full faith and credit” of the U.S. That makes it more like Sallie Mae than the FDIC. (Indeed, it comes out of [1] https://en.m.wikipedia.org/wiki/Savings_and_loan_association https://en.m.wikipedia.org/wiki/Savings_and_loan_association [2] Banks also failed. But they were resolved in an orderly way by the FDIC. Nothing there threatened to go systemic. https://www.fdic.gov/bank/historical/history/3_85.pdf https://www.fdic.gov/bank/historical/history/3_85.pdf
Finnucane 4y ago
Though the WAMU failure in 2008 nearly broke the FDIC. You know the cartoon of the snake eating the elephant? It was like that. Samll banks, on the other hand, fail every week and the FDIC cleans them up so fast no one even notices.
- ceejayoz 4y ago
  The WAMU failure also serves as a pretty good example of the other levers available in traditional banking regulation (and the pressure on the government to find a fix) that Coinbase is unlikely to be able to avail themselves of.
  - Finnucane 4y ago
    The WAMU bankruptcy was difficult for the FDIC to manage, and there was no ready buyer to take the remains. But if there had been no FDIC to manage it, the result would have been catastrophic failure. Like Lehman, but with more retail banking customers getting wiped out.
    - polski-g 4y ago
      Congress would have given the FDIC a blank check if they needed.
      - JumpCrisscross 4y ago
        > Congress would have given the FDIC a blank check if they needed Congress already did this. The FDIC reserve fund is mostly an accounting and accountability thing. The act creating the FDIC gives it the explicit backing of the United States’ “full faith and credit.”
- thaway2839 4y ago
  So basically a massive worst case financial crisis led to something almost, but not actually, failing. Sounds like the system worked extremely well.

cguess 4y ago

The difference is that if you're putting more than $250k into a bank account the bank pulls you aside and discusses proper financial planning and investment. Or you're smart enough to know already what you're getting into. The FDIC protects retail investors, so even if a banks holdings are not 100% covered, the uncovered portions are for non-retail customers and other holdings, not your savings account.

JCharante 4y ago

Well it's $250k per depositor per bank, and you can have single and joint accounts which doubles it. You can have more than a million that is FDIC insured, and that's good enough for most people, and if you lose your money beyond that then to be honest people don't need more than a million to still live a comfortable life that you can "restart" from.