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My surface-level understanding was the federal government started guaranteeing/ensuring customer deposits in order to prevent bank runs from starting. Why is th
by hackerlight 4y ago
My surface-level understanding was the federal government started guaranteeing/ensuring customer deposits in order to prevent bank runs from starting. Why is that not happening here? And if it is why wasn't it enough to prevent a bank run?
- jraby3 4y agoThat’s for personal deposits and limited to I think) $250k. Lots of startups hold a lot more money there and aren’t protected.
- ncallaway 4y agoI don’t think it’s only personal deposits. Corporations, I believe, enjoy FDIC protection up to $250k also. It’s just a much… less impactful amount for the average corporation compared to the average personal depositor
- ncallaway 4y agoFDIC isn’t designed to prevent runs entirely. It designed to prevent runs from having a serious financial impact on retail banking customers, and as such is capped at 250k per depositor per bank. SVB probably has a disproportionate number of its customers being mid to large businesses, for which FDIC protection isn’t as helpful. So they’re probably more vulnerable to runs than a bank that mostly holds retail customer funds. I don’t think the FDIC intends to stop every possible bank run, but rather dramatically reduce the number of them and reduce the impact when they happen. I think on that front the FDIC has been enormously successful