4 ms·

> - If there was a bank run, First Republic probably would not be able to meet all depositors. That's true for all banks, even JP Morgan Chase. Every single on

> - If there was a bank run, First Republic probably would not be able to meet all depositors. That's true for all banks, even JP Morgan Chase. Every single one of them has some withdrawal limit, past which they are screwed. And that limit is definitely lower than 100% of deposits.

dannyw 4y ago
Institutions deemed relatively safer (e.g. JPM Chase) are the banks that people withdraw to. Nobody is taking out $20M in cash, they're moving it to the "too big to fail" banks.
- lordnacho 4y ago
  That got me wondering why anyone leaves amounts over 250k anywhere else. If you have 5m are you going to open 20 bank accounts? If there's a wobble you'll need to dig out a lot of credentials to move your money, and you'd end up moving it to a TBTF anyway.
  - twblalock 4y ago
    If you have that kind of money in cash you pay someone to do that for you. If you want access to your money you don't juggle credentials, you call your banker and ask. Actually even if you don't have millions you can use sweep accounts that automatically spread money across multiple bank accounts. Fidelity has one that anyone can use.
  - bradleyjg 4y ago
    If you have $5 million why do you need it in demand accounts? Treasuries (notes, etc) are backed by the full faith and credit of the USG and are available in effectively unlimited amounts.
    - Terretta 4y ago
      About that 'full faith and credit' thing ... you have to have full faith in congress to give that credit. https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-thursday-start-taking-steps-to-avoid-default-yellen-warns-congress.html https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-t...
      - akiselev 4y ago
        Thankfully, worshipping at the altar of the US Dollar is the only unshakably bipartisan activity in US politics.
    - incrudible 4y ago
      The value of your treasuries will tank if interest rates rise. If you held cash, you could take advantage of that situation.
cortesoft 4y ago
Of course it is lower than 100%. Our whole modern banking system is built on this fact. https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking
- bloodyplonker22 4y ago
  FYI, all major banks switched off of fractional reserve banking more than a decade ago and have moved to another system that uses a multitude of different variables.
  - patrick451 4y ago
    What is this other system called?
    - cjbgkagh 4y ago
      No reserve banking, like fractional reserve but the fraction is zero. Instead the banks have to be able to pass stress tests which requires that they have reserves which in effect will be a fraction of deposits. It’s more complicated, less transparent, open to gaming, and there is huge incentive not to fail a bank. Also they often allow the use of cash-like instruments which are often riskier and less liquid and probably misrated by compromised rating agencies. The standards were lowered so that the banks would inflate the economy.

dannyw 4y ago

Institutions deemed relatively safer (e.g. JPM Chase) are the banks that people withdraw to. Nobody is taking out $20M in cash, they're moving it to the "too big to fail" banks.

lordnacho 4y ago
That got me wondering why anyone leaves amounts over 250k anywhere else. If you have 5m are you going to open 20 bank accounts? If there's a wobble you'll need to dig out a lot of credentials to move your money, and you'd end up moving it to a TBTF anyway.
- twblalock 4y ago
  If you have that kind of money in cash you pay someone to do that for you. If you want access to your money you don't juggle credentials, you call your banker and ask. Actually even if you don't have millions you can use sweep accounts that automatically spread money across multiple bank accounts. Fidelity has one that anyone can use.
- bradleyjg 4y ago
  If you have $5 million why do you need it in demand accounts? Treasuries (notes, etc) are backed by the full faith and credit of the USG and are available in effectively unlimited amounts.
  - Terretta 4y ago
    About that 'full faith and credit' thing ... you have to have full faith in congress to give that credit. https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-thursday-start-taking-steps-to-avoid-default-yellen-warns-congress.html https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-t...
    - akiselev 4y ago
      Thankfully, worshipping at the altar of the US Dollar is the only unshakably bipartisan activity in US politics.
  - incrudible 4y ago
    The value of your treasuries will tank if interest rates rise. If you held cash, you could take advantage of that situation.

cortesoft 4y ago

Of course it is lower than 100%. Our whole modern banking system is built on this fact. https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking

bloodyplonker22 4y ago
FYI, all major banks switched off of fractional reserve banking more than a decade ago and have moved to another system that uses a multitude of different variables.
- patrick451 4y ago
  What is this other system called?
  - cjbgkagh 4y ago
    No reserve banking, like fractional reserve but the fraction is zero. Instead the banks have to be able to pass stress tests which requires that they have reserves which in effect will be a fraction of deposits. It’s more complicated, less transparent, open to gaming, and there is huge incentive not to fail a bank. Also they often allow the use of cash-like instruments which are often riskier and less liquid and probably misrated by compromised rating agencies. The standards were lowered so that the banks would inflate the economy.