5 ms·

> makes customers whole *As long as whole is less than $250k.

arcticbull 4y ago
Yes, that's the worst case - however in the real world the FDIC and the OTS (Office of Thrift Supervision) does their best to ensure nobody loses any amount of money regardless of their account balance. In the case of WaMu in 2008 for instance, the OTS took possession of the bank and sold it to JPMorgan Chase. They didn't draw on the deposit insurance fund and everyone stayed whole. [1] "According to FDIC spokeswoman LaJuan Williams-Young, 'No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.'" [2, 3] [edit] Looks like I found one case where a bank failed and a total of $500,000 in uninsured deposits (not in a single account, in total) were forfeit. [4] [1] https://en.wikipedia.org/wiki/Washington_Mutual https://en.wikipedia.org/wiki/Washington_Mutual [2] https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp... [3] https://www.magnifymoney.com/banking/deposits-bank-failures/ https://www.magnifymoney.com/banking/deposits-bank-failures/ [4] https://www.depositaccounts.com/blog/bank-failures/#p21332 https://www.depositaccounts.com/blog/bank-failures/#p21332
- addicted 4y ago
  I guess the only valid point is that the allure of small banks may be overstated. There is a problem with large banks. It’s the same problem with large companies from any other industry. They gain oversized political power. However, it’s weird to me how much we go after the banks for being large when it’s far more regulated than nearly every other industry in the country.
- AmericanChopper 4y ago
  > No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933 This is just a truism because all insured deposits are insured, and all non-insured deposits are non—insured.
  - arcticbull 4y ago
    Yes, you're right, however, do you have a source on how much has been lost in the last 89 years? I've had a lot of trouble finding anything more than that one bank that had $30M in assets losing $500K in total one time in Texas in the last 5 years.
    - NovemberWhiskey 4y ago
      The failure of IndyMac is the poster-child of the modern era - losses on uninsured deposits were certainly into the multiple hundreds of millions; it's really that case which prompted the increase of the FDIC insurance limit.
      - Asparagirl 4y ago
        Yup. About 10,000 people (well, 10,000 depositors, some of which were actually companies or trusts or things like that, not all people) lost more than $270 million in total uninsured funds that were over the FDIC limits in the IndyMac collapse.
  - deleted 4y ago
    [deleted]
  - bobthepanda 4y ago
    Well, you can have a deposit insurance scheme that fails to insure bank deposits. IIRC this happened at least once during the eurozone crisis where national deposit schemes could not insure the cross-border activities of their banks.
- jsmith45 4y ago
  That "No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933" claim is in reference to just the insured part of the deposits (as in up to the limits). FDIC is required to go with the resolution that will cost the least to the fund. An acquirer offering to take on all Deposits rather than just insured deposits is typically not a big problem for the acquirer, and can save a surprising amount of money on the FDICs side, so most acquisition offers tend to be for all deposits rather than just insured deposits. (It also tends to keep your new customers happier if they did not lose money, which is very much an actual consideration that goes into bidding on a failing bank). However, sometimes a bank will successfully bid for only the insured portions of deposit accounts. This happened with The Enloe State Bank in 2019, where Legend Bank's bid to acquire just the insured portions of deposit accounts. Nevertheless, losing deposits over the insured amount in a bank closure is definitely the exception and not the norm in recent times.
  - arcticbull 4y ago
    Yeah, Enloe is the case I referenced, I think it lost a total of $500K in uninsured funds.
- kragen 4y ago
  At my first tech job we stored our source code repo on a NetApp FAServer. Super reliable hardware, RAID4, built-in snapshots so users could recover their accidentally deleted files without sysadmin intervention. No developer lost a byte of their data once the NetApp was installed. Until we found out that one guy had done the wrong thing and corrupted a file a few months ago. That's how we found out our backups (made with the very expensive backup software Alexandria) didn't work. And this was well before Git, so we didn't have multiple redundant repositories we could sync from to recover. The humongous NetApp rackmount RAID was 35 gigabytes if I recall correctly. This is a problem with improving reliability through redundancy: sometimes instead of getting reliability, you just shift the failure modes to more catastrophic systemic failures, because they happen too rarely for people to assess the risks properly. Speaking of systemic failures, everybody who's had US$10k in the bank since last year (or in other dollar-denominated assets such as T-bills) has lost US$800 of it to inflation over the last year. What else could you have you spent US$800 on? If your retirement fund has US$100k in the money market that inflation cost you US$8000. Still, be glad you're not in Argentina. Our central bank printed a trillion pesos last month, a quarter of the monetary base, and the inflation over the last year has been about 60%.
  - ceejayoz 4y ago
    > Speaking of systemic failures, everybody who's had US$10k in the bank since last year (or in other dollar-denominated assets such as T-bills) has lost US$800 of it to inflation over the last year. If that's a concern to you, put it in I Bonds; interest tracks inflation, so the current rate is 9.62%. Buy $15k a year, or $30k if you've a spouse.
    - kragen 4y ago
      Series I bonds are not available to the 95% of people that aren't US citizens, residents, or employees; they're nontransferable, and that's who the Treasury sells them to. See https://savingsbonds.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#who https://savingsbonds.gov/indiv/research/indepth/ibonds/res_i.... The government here also indexed a lot of things to inflation: pensions, certain bonds, etc. So when they couldn't pay their debts about 20 years ago they started falsifying the official inflation rate. Poof, no more problem! What do you think the US government will do with I bonds if it's insolvent? It'll default, sneakily or openly. You can't reduce the risks of systemic failure by centralizing harder. To manage risk you need to diversify, not double down.
- Asparagirl 4y ago
  Whoa, hold up there. The risks to bank stability, and customer deposit integrity, are a little higher than most people may realize. Back in the 2007-2010 financial crisis, IndyMac Bank went under. They were a major bank on the west coast, especially the Los Angeles metro area. And when they did, there were thousands of depositors who were over the FDIC limits for their accounts, which at the time were only $100,000 per account, not yet raised to $250,000 per account. Some were individuals, some were businesses, some were trust accounts, some were only supposed to be temporarily over the limit because they held money from a deceased person that was a life insurance payout or going through probate, and so on. But what was really unusual in their case was that the FDIC could not find any other bank that would take over IndyMac Bank directly, and assume its debts and deposits. So the FDIC had to create a brand new bank out of whole cloth, called IndyMac Federal Bank (note the name), to take over IndyMac Bank, before it could be dealt with further. Eventually it got acquired by One West. Just this one bank's failure cost the FDIC eleven billion dollars. And the FDIC as an agency barely managed to stay afloat during the 2007-2010 financial crisis, because it had so many banks where it had to either manage shotgun weddings with other more-stable banks, or bail them out entirely. Of course, the FDIC had an implicit backstop from Congress, but they came damn near bumping up against their full budget during this time period. And again, that eleven billion for that one bank was not counting all the people who were over their deposit limits -- $270 million over the limits, in total. Those people were screwed. https://www.latimes.com/archives/blogs/money-company/story/2009-10-29/fdics-bair-offers-no-comfort-to-uninsured-indymac-depositors https://www.latimes.com/archives/blogs/money-company/story/2...
woodruffw 4y ago
Per individual account (joint accounts are double). The FDIC is more than happy to ensure all of the accounts you'd like to open. (And as 'arcticbull mentioned: the FDIC has reliably made much larger account holders whole.)
dragonwriter 4y ago
> As long as whole is less than $250k. Usually, no As an insurer, sure, $250K per account owner per ownership class. (Notably, single and joint accounts are separate ownership categories, so with proper distribution of balances, a married couple with single and joint accounts at one institution, is covered up to $1,000,000 in total. $250k each in the individual category, and $250k each in the joint category. But it also acts as a receiver of failed banks, and in that capacity can facilitate the sale of assets tied to the uninsured portion of the debts represented by account balances. Usually, this ends up with making account holders whole without limit.
- lamontcg 4y ago
  For a single individual are savings and checking accounts considered separate accounts?
  - dragonwriter 4y ago
    > For a single individual are savings and checking accounts considered separate accounts? Insurance limits are not by account, they are by account ownership category. Checking and savings account held as single accounts are all part of the same ownership category: https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance/ https://www.fdic.gov/resources/deposit-insurance/brochures/d...
pkulak 4y ago
Folks with more than 250k know not to put any of it over the bounds of the FDIC.
- AmericanChopper 4y ago
  $250k is only just a home down payment in a lot of cities.
  - majormajor 4y ago
    That doesn't stop you from spreading it out... while you say "only" just a down payment, it's also worth noting that a down payment is the single largest cash transaction many people will ever make. Which is all the more reason that it doesn't make sense to have a giant balance all in the same spot 99% of the time. ("A lot" of cities is also doing a lot of work in that sentence... 250k is 20% of 1.25M. That would buy you a lot of house in the vast majority of US cities.
Tool_of_Society 4y ago
I wish I had +250k in my bank account....
- leeoniya 4y ago
  did it work?

Yes, that's the worst case - however in the real world the FDIC and the OTS (Office of Thrift Supervision) does their best to ensure nobody loses any amount of money regardless of their account balance. In the case of WaMu in 2008 for instance, the OTS took possession of the bank and sold it to JPMorgan Chase. They didn't draw on the deposit insurance fund and everyone stayed whole. [1] "According to FDIC spokeswoman LaJuan Williams-Young, 'No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.'" [2, 3] [edit] Looks like I found one case where a bank failed and a total of $500,000 in uninsured deposits (not in a single account, in total) were forfeit. [4] [1] https://en.wikipedia.org/wiki/Washington_Mutual https://en.wikipedia.org/wiki/Washington_Mutual [2] https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp... [3] https://www.magnifymoney.com/banking/deposits-bank-failures/ https://www.magnifymoney.com/banking/deposits-bank-failures/ [4] https://www.depositaccounts.com/blog/bank-failures/#p21332 https://www.depositaccounts.com/blog/bank-failures/#p21332

addicted 4y ago
I guess the only valid point is that the allure of small banks may be overstated. There is a problem with large banks. It’s the same problem with large companies from any other industry. They gain oversized political power. However, it’s weird to me how much we go after the banks for being large when it’s far more regulated than nearly every other industry in the country.
AmericanChopper 4y ago
> No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933 This is just a truism because all insured deposits are insured, and all non-insured deposits are non—insured.
- arcticbull 4y ago
  Yes, you're right, however, do you have a source on how much has been lost in the last 89 years? I've had a lot of trouble finding anything more than that one bank that had $30M in assets losing $500K in total one time in Texas in the last 5 years.
  - NovemberWhiskey 4y ago
    The failure of IndyMac is the poster-child of the modern era - losses on uninsured deposits were certainly into the multiple hundreds of millions; it's really that case which prompted the increase of the FDIC insurance limit.
    - Asparagirl 4y ago
      Yup. About 10,000 people (well, 10,000 depositors, some of which were actually companies or trusts or things like that, not all people) lost more than $270 million in total uninsured funds that were over the FDIC limits in the IndyMac collapse.
- deleted 4y ago
  [deleted]
- bobthepanda 4y ago
  Well, you can have a deposit insurance scheme that fails to insure bank deposits. IIRC this happened at least once during the eurozone crisis where national deposit schemes could not insure the cross-border activities of their banks.
jsmith45 4y ago
That "No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933" claim is in reference to just the insured part of the deposits (as in up to the limits). FDIC is required to go with the resolution that will cost the least to the fund. An acquirer offering to take on all Deposits rather than just insured deposits is typically not a big problem for the acquirer, and can save a surprising amount of money on the FDICs side, so most acquisition offers tend to be for all deposits rather than just insured deposits. (It also tends to keep your new customers happier if they did not lose money, which is very much an actual consideration that goes into bidding on a failing bank). However, sometimes a bank will successfully bid for only the insured portions of deposit accounts. This happened with The Enloe State Bank in 2019, where Legend Bank's bid to acquire just the insured portions of deposit accounts. Nevertheless, losing deposits over the insured amount in a bank closure is definitely the exception and not the norm in recent times.
- arcticbull 4y ago
  Yeah, Enloe is the case I referenced, I think it lost a total of $500K in uninsured funds.
kragen 4y ago
At my first tech job we stored our source code repo on a NetApp FAServer. Super reliable hardware, RAID4, built-in snapshots so users could recover their accidentally deleted files without sysadmin intervention. No developer lost a byte of their data once the NetApp was installed. Until we found out that one guy had done the wrong thing and corrupted a file a few months ago. That's how we found out our backups (made with the very expensive backup software Alexandria) didn't work. And this was well before Git, so we didn't have multiple redundant repositories we could sync from to recover. The humongous NetApp rackmount RAID was 35 gigabytes if I recall correctly. This is a problem with improving reliability through redundancy: sometimes instead of getting reliability, you just shift the failure modes to more catastrophic systemic failures, because they happen too rarely for people to assess the risks properly. Speaking of systemic failures, everybody who's had US$10k in the bank since last year (or in other dollar-denominated assets such as T-bills) has lost US$800 of it to inflation over the last year. What else could you have you spent US$800 on? If your retirement fund has US$100k in the money market that inflation cost you US$8000. Still, be glad you're not in Argentina. Our central bank printed a trillion pesos last month, a quarter of the monetary base, and the inflation over the last year has been about 60%.
- ceejayoz 4y ago
  > Speaking of systemic failures, everybody who's had US$10k in the bank since last year (or in other dollar-denominated assets such as T-bills) has lost US$800 of it to inflation over the last year. If that's a concern to you, put it in I Bonds; interest tracks inflation, so the current rate is 9.62%. Buy $15k a year, or $30k if you've a spouse.
  - kragen 4y ago
    Series I bonds are not available to the 95% of people that aren't US citizens, residents, or employees; they're nontransferable, and that's who the Treasury sells them to. See https://savingsbonds.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#who https://savingsbonds.gov/indiv/research/indepth/ibonds/res_i.... The government here also indexed a lot of things to inflation: pensions, certain bonds, etc. So when they couldn't pay their debts about 20 years ago they started falsifying the official inflation rate. Poof, no more problem! What do you think the US government will do with I bonds if it's insolvent? It'll default, sneakily or openly. You can't reduce the risks of systemic failure by centralizing harder. To manage risk you need to diversify, not double down.
Asparagirl 4y ago
Whoa, hold up there. The risks to bank stability, and customer deposit integrity, are a little higher than most people may realize. Back in the 2007-2010 financial crisis, IndyMac Bank went under. They were a major bank on the west coast, especially the Los Angeles metro area. And when they did, there were thousands of depositors who were over the FDIC limits for their accounts, which at the time were only $100,000 per account, not yet raised to $250,000 per account. Some were individuals, some were businesses, some were trust accounts, some were only supposed to be temporarily over the limit because they held money from a deceased person that was a life insurance payout or going through probate, and so on. But what was really unusual in their case was that the FDIC could not find any other bank that would take over IndyMac Bank directly, and assume its debts and deposits. So the FDIC had to create a brand new bank out of whole cloth, called IndyMac Federal Bank (note the name), to take over IndyMac Bank, before it could be dealt with further. Eventually it got acquired by One West. Just this one bank's failure cost the FDIC eleven billion dollars. And the FDIC as an agency barely managed to stay afloat during the 2007-2010 financial crisis, because it had so many banks where it had to either manage shotgun weddings with other more-stable banks, or bail them out entirely. Of course, the FDIC had an implicit backstop from Congress, but they came damn near bumping up against their full budget during this time period. And again, that eleven billion for that one bank was not counting all the people who were over their deposit limits -- $270 million over the limits, in total. Those people were screwed. https://www.latimes.com/archives/blogs/money-company/story/2009-10-29/fdics-bair-offers-no-comfort-to-uninsured-indymac-depositors https://www.latimes.com/archives/blogs/money-company/story/2...

woodruffw 4y ago

Per individual account (joint accounts are double). The FDIC is more than happy to ensure all of the accounts you'd like to open. (And as 'arcticbull mentioned: the FDIC has reliably made much larger account holders whole.)

dragonwriter 4y ago

> As long as whole is less than $250k. Usually, no As an insurer, sure, $250K per account owner per ownership class. (Notably, single and joint accounts are separate ownership categories, so with proper distribution of balances, a married couple with single and joint accounts at one institution, is covered up to $1,000,000 in total. $250k each in the individual category, and $250k each in the joint category. But it also acts as a receiver of failed banks, and in that capacity can facilitate the sale of assets tied to the uninsured portion of the debts represented by account balances. Usually, this ends up with making account holders whole without limit.

lamontcg 4y ago
For a single individual are savings and checking accounts considered separate accounts?
- dragonwriter 4y ago
  > For a single individual are savings and checking accounts considered separate accounts? Insurance limits are not by account, they are by account ownership category. Checking and savings account held as single accounts are all part of the same ownership category: https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance/ https://www.fdic.gov/resources/deposit-insurance/brochures/d...

pkulak 4y ago

Folks with more than 250k know not to put any of it over the bounds of the FDIC.

AmericanChopper 4y ago
$250k is only just a home down payment in a lot of cities.
- majormajor 4y ago
  That doesn't stop you from spreading it out... while you say "only" just a down payment, it's also worth noting that a down payment is the single largest cash transaction many people will ever make. Which is all the more reason that it doesn't make sense to have a giant balance all in the same spot 99% of the time. ("A lot" of cities is also doing a lot of work in that sentence... 250k is 20% of 1.25M. That would buy you a lot of house in the vast majority of US cities.

Tool_of_Society 4y ago

I wish I had +250k in my bank account....

leeoniya 4y ago
did it work?