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I put $100 in my Chase account. Chase goes horse betting with my money and loses it all. My account shows $0. That's basically what happened here.
by newfonewhodis 4y ago
I put $100 in my Chase account. Chase goes horse betting with my money and loses it all. My account shows $0.
That's basically what happened here.
- deleted 4y ago[deleted]
- jefftk 4y agoWell, your account still shows $100, but Chase has paused withdrawals while they "sort out liquidity issues" so it's effectively $0
- chlodwig 4y agoNot exactly, because banks tell you that they will loan out your money and you might not get it back, that's why you get interest on the account. They can't go horse betting, but they can loan it out. You don't have "title" over the USD in the bank reserves. This is like if you put $100 in Chase's security deposit box, and they opened it up, took the cash, and lent it out, and then when you come to get it, they say, woops, we lost it all. That would be just straight up theft or fraud.
- kwertyoowiyop 4y agoIn the USA, bank accounts are guaranteed by the government, up to $250K.
- tootie 4y agoAnd the FDIC can afford to do that because there are laws dictating liquidity requirements to banks and disclosure requirements to inspect and enforce those rules.
- kwertyoowiyop 4y agoIt’s almost as if our existing financial system, built upon the lessons from hundreds of years, is worthwhile! :-)
- Veliladon 4y agoIt's been funny to watch crypto basically speedrun the entire monetary system from Rai stones all the way to calls for central banking.
- Animatronio 4y agoThat's what makes it so boring, whereas DeFi is so exciting it gives you a heart attack seemingly every other day.
- legutierr 4y agoWhat does DeFi have to do with any of what is happening with FTX?
- imtringued 4y agoThat doesn't stop people from thinking the Fed is the spawn of Satan.
- kwertyoowiyop 4y agoWhat was that recent quote about cats thinking they are independent, but in fact are completely dependent on a system that they don't understand at all?
- nostrebored 4y ago
- gfd 4y agoOnly tangentially related, but don't put cash in safety deposit boxes. Police can take them under civil forfeiture laws: https://nypost.com/2021/06/12/fbi-aims-to-keep-valuables-86m-cash-found-in-safe-deposit-store-raid/ https://nypost.com/2021/06/12/fbi-aims-to-keep-valuables-86m... https://www.businessinsider.com/fbi-raid-1400-boxes-us-private-vaults-ruling-2022-10 https://www.businessinsider.com/fbi-raid-1400-boxes-us-priva...
- cmeacham98 4y agoCivil asset forfeiture is one of those things that feels really unjust in the US, and I'm somewhat surprised there hasn't been a Supreme Court case ruling it unconstitutional per the 4th Amendment. I'd love to hear a steelmanned argument in favor of it, maybe I'm missing something obvious?
- deleted 4y ago[deleted]
- HideousKojima 4y agoThe only steelmanned argument for civil asset forfeiture goes back to its origins, when it was used to seize smuggled goods on ships. Since the ship's owner was almost always a wealthy person living in a different country making them almost impossible to go after, and the smuggled goods were missing tax stamps etc. making it clear that they were being illegally smuggled, the government would simply seize the goods. That's literally the origin of civil asset forfeiture in the US, and all of the horrible and unjustifiable examples of it that we see nowadays grew out of that much more limited and justifiable example.
- tialaramex 4y agoSeems to me in the specific case of wealthy foreigner owns smuggled good a better (more just) arrangement accuses them not the goods, but with the mechanism that if they for some reason don't want to attend court (maybe because they're super guilty?) their goods are seized but the crime still exists. There are some nuances to work out to ensure cops can't accuse say Vladimir Putin of a crime involving the $8000 they found in your house, and then since Putin doesn't show up they keep your money, but the general idea seems more sound than civil forfeiture.
- SilasX 4y ago>Not exactly, because banks tell you that they will loan out your money and you might not get it back, that's why you get interest on the account. That's not right either. They promise you will get it back (the FDIC insurance), just that e.g. large amounts may have a delay. They are also scrutinized by regulators to ensure that the loans are sane enough not to all evaporate in value overnight, as a horse bet might.
- derangedHorse 4y agoAs others have pointed out in comments on this post, banks typically don't loan out customer funds and instead use them as reserves. For loans, banks can create money out of thin air and just increase the number representing the borrower's bank account balance in a database somewhere. Interest is to incentivize adding more reserves to their balance sheets which in turn allows more loans (with considerably larger interest rates) to be given out
- fdgsdfogijq 4y agoWhy is this getting downvoted? its a plain speech description of what they did
- RC_ITR 4y agoBecause Chase actually does something sort of similar (primarily mortgage lending), but they employ a ton of people to think all day about managing risk. So I think people don't like the comparison, since the true difference is FTX did horse betting, while Chase does something much more rational.
- zeven7 4y agoTo add to that: Chase tells you what they're doing. FTX told its customers it wouldn't lend it out, and then it did. Additionally, customer accounts at Chase are insured by FDIC up to $250k. Chase tells you they're going to bet with your money, manages the risk well* on most days*, and even if they lose your money you get it back anyway. FTX did the opposite of all that.
- mjn 4y agoChase is also more restricted in how the investment banking side of the business can use funds from the retail banking side, precisely because banks in the 1920s did play fast and loose with investing customer deposits, which caused a bunch of depositors to lose savings in the 1929 crash and associated bank runs. The amount of interaction between the two sides that's allowed has increased and decreased over the years, but it hasn't been unrestricted since the Glass-Steagall Act of 1933: https://en.wikipedia.org/wiki/Separation_of_investment_and_retail_banking https://en.wikipedia.org/wiki/Separation_of_investment_and_r...
- based69 4y agoDoesnt fannie mae/freddie mac essentially backstop a lot of this risk too?
- roflyear 4y agoProbably bc all crypto exchanges are doing this, essentially. It is the burden of no regulations.
- deleted 4y ago[deleted]
- shapefrog 4y agoIf the 50-1 shot horse won the race, they would have put your $100 back in your account and put $4900 in their account
- vgeek 4y agoI know pop culture and humor is frowned upon on HN, but https://m.youtube.com/watch?v=XhFTG7fFwc4 https://m.youtube.com/watch?v=XhFTG7fFwc4 is just too relevant to not share for this whole situation.
- jojobas 4y agoExcept 1) Chase doesn't have to show you $0, you'll still see $100. 2) When you decide to spend the money, chances are the seller is also with Chase, then all Chase has to do is show you $0 and the seller +$100 3) If the seller happens to be with another bank, Chase will just go in credit with that other bank for $100. The total of such interbank accounts is around 0 as money flows both ways, and, with a decent margin, within the bank reserve amount. Fractional-reserve banking works so well with so little "actual" reserve money that some consider it counterfeiting.
- colinmhayes 4y agoEventually the other bank will ask for settlement. Maybe it’s because you owe them a billion dollars and they have a liquidity crisis. Whatever the reason is, you can’t just go on forever “oweing” then money.