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FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDI

FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC.

dheera 4y ago
OK sure so the FDIC can just insure FTX then. Other brokerages lend out their spare cash without your consent, too. It's not really any different other than that law has (rather arbitrarily) decided to protect one and not the other.
- skullone 4y ago
  Insure what, exactly? Insure peoples imaginary crypto coins? Insure deposits into a brokerage account? Did FTX sweep brokerage accounts into a valid, insurable class? You're missing a ton here, buddy
- adasdasdas 4y ago
  The fdic is not a law, its a self sufficient insurance company that banks pay premiums to.
- pushrax 4y ago
  Proper brokerages will pay you to lend your securities, transparently disclose their programs, and require consent. For example: - https://www.interactivebrokers.com/en/pricing/stock-yield-enhancement-program.php https://www.interactivebrokers.com/en/pricing/stock-yield-en... - https://www.fidelity.com/trading/fully-paid-lending https://www.fidelity.com/trading/fully-paid-lending Some brokerages lend out spare cash (and pay a transparent interest rate, and are subject to strict reserve requirements) but the majority of assets controlled by a typical brokerage are securities. FTX assets were all subject to their leverage strategies, with no specific reserve.
darepublic 4y ago
also my bank hasn't gone insolvent yet
- ffreire 4y ago
  "Yet" is the operative word. Many banks were insolvent in 2008, or have we so quickly forgotten the lessons from the housing crisis.
TuringNYC 4y ago
>> FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC. Also, banks have capital leverage ratios they need to abide by. FTX had no concept of leverage ratios or haircutting assets by liquidity.
- dheera 4y ago
  > Also, banks have capital leverage ratios they need to abide by. I mean yes, but it's just a band-aid for a shitty system in which they allow banks to lend money they don't have, so they needed some ratio to control the mess they created. In in ideal system nobody lends money that isn't their own. Period.
  - dantheman 4y ago
    In an ideal system they don't lend out demand deposits, but lend out money from cds and other instruments.

FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC.

dheera 4y ago

OK sure so the FDIC can just insure FTX then. Other brokerages lend out their spare cash without your consent, too. It's not really any different other than that law has (rather arbitrarily) decided to protect one and not the other.

skullone 4y ago
Insure what, exactly? Insure peoples imaginary crypto coins? Insure deposits into a brokerage account? Did FTX sweep brokerage accounts into a valid, insurable class? You're missing a ton here, buddy
adasdasdas 4y ago
The fdic is not a law, its a self sufficient insurance company that banks pay premiums to.
pushrax 4y ago
Proper brokerages will pay you to lend your securities, transparently disclose their programs, and require consent. For example: - https://www.interactivebrokers.com/en/pricing/stock-yield-enhancement-program.php https://www.interactivebrokers.com/en/pricing/stock-yield-en... - https://www.fidelity.com/trading/fully-paid-lending https://www.fidelity.com/trading/fully-paid-lending Some brokerages lend out spare cash (and pay a transparent interest rate, and are subject to strict reserve requirements) but the majority of assets controlled by a typical brokerage are securities. FTX assets were all subject to their leverage strategies, with no specific reserve.

darepublic 4y ago

also my bank hasn't gone insolvent yet

ffreire 4y ago
"Yet" is the operative word. Many banks were insolvent in 2008, or have we so quickly forgotten the lessons from the housing crisis.

TuringNYC 4y ago

>> FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC. Also, banks have capital leverage ratios they need to abide by. FTX had no concept of leverage ratios or haircutting assets by liquidity.

dheera 4y ago
> Also, banks have capital leverage ratios they need to abide by. I mean yes, but it's just a band-aid for a shitty system in which they allow banks to lend money they don't have, so they needed some ratio to control the mess they created. In in ideal system nobody lends money that isn't their own. Period.
- dantheman 4y ago
  In an ideal system they don't lend out demand deposits, but lend out money from cds and other instruments.