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I have the most esoteric financial law trivia question. If I deposit a dollar in my bank account. Do I legally own that money? Or do I have a legal contract wi

I have the most esoteric financial law trivia question. If I deposit a dollar in my bank account. Do I legally own that money? Or do I have a legal contract with the bank that they’ll give me back that money?

paxys 4y ago
https://www.sgrlaw.com/does-the-money-in-your-bank-account-really-belong-to-you/ https://www.sgrlaw.com/does-the-money-in-your-bank-account-r... > At the moment of deposit, the funds become the property of the depository bank. > Thus, as a depositor, you are in essence a creditor of the bank. Once the bank accepts your deposit, it agrees to refund the same amount, or any part thereof, on demand. At least in New York state, the answer to the first question is no. I imagine it's the same everywhere else.
- deleted 4y ago
  [deleted]
- jbverschoor 4y ago
  Yup. you just have a claim on that institution. It not like holding stock or bonds
  - ProllyInfamous 4y ago
    Further, the FDIC (a US insurance agency with sweeping banking powers) guarantees that you will be able to redeem AT MOST AND UP TO $250,000, per account; guaranteed by the "legitimacy" of the USDollar (aka Taxpayers and US Debt holders).
    - deleted 4y ago
      [deleted]
deepGem 4y ago
You have a legal contract with FDIC which insures all deposits upto $250K is what I know. If the bank goes bust FDIC owes you your money under 250K.
- eru 4y ago
  I don't think individual deposit holders technically have a legal contract with the FDIC. Are you sure? Do you have any sources on that? You are right in practice that the FDIC guarantees small deposits.
  - deepGem 4y ago
    You are right. There is no legal contract, it's an insurance policy. In practice this is as good as having a legal contract is what I meant.
    - eru 4y ago
      In practice it's probably better than a legal contract for a small time depositor in some ways, because there's lots of political pressure on FDIC to make good on that. If it was just a legal contract, in the worst case you'd have to sue to hold them to account. (On the other hand, politics can change from one day to the next; but contracts are harder to unilaterally change.)
deleted 4y ago
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deleted 4y ago
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vishnugupta 4y ago
It's the latter and it's true of any form of money; i.e., money as defined in legal terms. Money always has a counter-party and there's a finite chance of that counter-party not honouring their commitment. For example, last year treasury announced sanctions after Ukraine conflict where they froze Russian USD assets. This is essentially the govt of United States deciding to not honour their commitment. Even when you physically own money, let's say physical cash/bills, the counterparty could default. For instance in Nov 2016 govt of India declared that about 90% of currency in circulation stop being money within a certain deadline. In my mind whenever I try to analyse money or different forms of money I always think in terms of counterparty.
- eru 4y ago
  I mostly agree. > Money always has a counter-party [...] That's mostly true for most forms of money. But not technically true for gold coins or bitcoin. > For example, last year treasury announced sanctions after Ukraine conflict where they froze Russian USD assets. This is essentially the govt of United States deciding to not honour their commitment. That's sort-of true. It's a bit simplified. The treasury isn't typically the counterparty for these commitments. What they did was ban other entities from honouring their own commitments. So eg if a bank in Singapore didn't want to lose access to the USD ecosystem, they had to cease honouring their commitments to certain Russian entities. That's independent of whether those commitments were specified in USD, Singapore dollars, Euros, British Pounds or pork bellies.
  - vishnugupta 4y ago
    Thanks for clarifying about the treasury part. I thought treasury (or the US Govt) had instructed federal reserve to freeze assets of Russian entity. > But not technically true for gold coins In so far as gold is used as money one is indeed relying on rest of humanity/society to accept it in exchange for whatever you need. Granted that for most (all?) of their existence, civilised humans have accepted gold as money because of its use as jewellery and its attractive qualities. But there's still a possibility that some tribe/community will refuse to accept gold as money as they don't have any use value of it. In my mind, money is a promise or a contract which says here's a "thing" I'll give you in exchange for goods or services. The other party could always walk away from that contract or decide to not honour that promise. Gold/cattle etc., have worked as money because they have an intrinsic use value which one could fall back to if it stops working as money. Which brings me to the next point. > ..or bitcoin. I could never understand the intrinsic use value of Bitcoin. People think of it as store of energy or whatever but what is the intrinsic use of Bitcoin? ETH at least is used as a currency to get work done on Ethereum chain so that is its intrinsic use value.
eru 4y ago
Going off on a tangent: All publicly issued stocks in the US are technically owned by one obscure New York company. Your broker has a contractual relationship with them, and you have a contractual relationship with your broker. See https://en.wikipedia.org/wiki/Cede_and_Company https://en.wikipedia.org/wiki/Cede_and_Company Technically, you don't own any (public) shares.
__debugger__ 4y ago
What does owning a dollar even mean? Fundamentally, isn’t your dollar bill also a legal certificate with the Fed?
- wahern 4y ago
  Once upon a time bills (banknotes) were bearer instruments which could be exchanged with the Treasury for silver. (Or with whatever issuing entity in whatever they promised--typically gold or silver.) A bearer instrument is payable by the drawee to whomever physically presents the instrument. These days the value of bills is solely in being legal tender; that is, an authentic bill can be used for satisfaction of any court-ordered debt. That's not the same thing as requiring people to transact with you using those bills. But if someone sued you in court and gained a judgement against you, then you could use those bills to satisfy the judgement. Example: you ran away with a candy bar after the clerk refused to take your dirty dollar bill. They sue you. The court orders you to pay the store $1, which you can satisfy with an authentic $1 note, even the original dirty note. Maybe the clerk refused the bill because the store only accepts Bitcoin payments. I'm not sure, but the judgment could in theory include whatever costs the store incurred (if any) by being forced to take cash, which you would could also pay in cash. Because ultimately whatever damages or costs were incurred can be satisfied by the jurisdiction's legal currency, in which such damages and costs are also typically denominated.
lordnacho 4y ago
IANAL, but a finance guy. Depositing money is lending money. It's presented like some special thing, but at the end of the day you no longer have your dollar, you have an IOU for a dollar issued by the bank. Yes, you have a deal with the bank that they will give you your money back whenever you want. Now normally there's no point in mincing words, you have 50K at the bank, whatever. But if the bank fails, you still don't have the money in your hands, you are still owed it. What normally happens when a business can't pay back its debts is there's a bankruptcy procedure and everything is frozen until a bankruptcy lawyer parachutes in to handle things. Now keep in mind they are bankrupt because they don't have a way to pay back everyone, so there are laws about how your IOUs are settled. This is called a haircut, because chances are the creditors will not get back the full amounts they're owed. (In rare cases a bankrupt business somehow manages to sell its assets for more than the liabilities.) If it's a bank, there's insurance schemes in various countries to help out the depositors. But the deal is basically that, you are lending money to the bank, and they are lending to other people eg mortgages, business loans, overdrafts, etc. Getting back to your question, there's not a whole lot of meat on the "what does the law say" bone. SVB is dead, carcass is divided up between the creditors.
jbverschoor 4y ago
Maybe the HN crowd will finally understand the value of crypto? Oh wait.. banks and currency are save

paxys 4y ago

https://www.sgrlaw.com/does-the-money-in-your-bank-account-really-belong-to-you/ https://www.sgrlaw.com/does-the-money-in-your-bank-account-r... > At the moment of deposit, the funds become the property of the depository bank. > Thus, as a depositor, you are in essence a creditor of the bank. Once the bank accepts your deposit, it agrees to refund the same amount, or any part thereof, on demand. At least in New York state, the answer to the first question is no. I imagine it's the same everywhere else.

deleted 4y ago
[deleted]
jbverschoor 4y ago
Yup. you just have a claim on that institution. It not like holding stock or bonds
- ProllyInfamous 4y ago
  Further, the FDIC (a US insurance agency with sweeping banking powers) guarantees that you will be able to redeem AT MOST AND UP TO $250,000, per account; guaranteed by the "legitimacy" of the USDollar (aka Taxpayers and US Debt holders).
  - deleted 4y ago
    [deleted]

deepGem 4y ago

You have a legal contract with FDIC which insures all deposits upto $250K is what I know. If the bank goes bust FDIC owes you your money under 250K.

eru 4y ago
I don't think individual deposit holders technically have a legal contract with the FDIC. Are you sure? Do you have any sources on that? You are right in practice that the FDIC guarantees small deposits.
- deepGem 4y ago
  You are right. There is no legal contract, it's an insurance policy. In practice this is as good as having a legal contract is what I meant.
  - eru 4y ago
    In practice it's probably better than a legal contract for a small time depositor in some ways, because there's lots of political pressure on FDIC to make good on that. If it was just a legal contract, in the worst case you'd have to sue to hold them to account. (On the other hand, politics can change from one day to the next; but contracts are harder to unilaterally change.)

deleted 4y ago

[deleted]

deleted 4y ago

[deleted]

vishnugupta 4y ago

It's the latter and it's true of any form of money; i.e., money as defined in legal terms. Money always has a counter-party and there's a finite chance of that counter-party not honouring their commitment. For example, last year treasury announced sanctions after Ukraine conflict where they froze Russian USD assets. This is essentially the govt of United States deciding to not honour their commitment. Even when you physically own money, let's say physical cash/bills, the counterparty could default. For instance in Nov 2016 govt of India declared that about 90% of currency in circulation stop being money within a certain deadline. In my mind whenever I try to analyse money or different forms of money I always think in terms of counterparty.

eru 4y ago
I mostly agree. > Money always has a counter-party [...] That's mostly true for most forms of money. But not technically true for gold coins or bitcoin. > For example, last year treasury announced sanctions after Ukraine conflict where they froze Russian USD assets. This is essentially the govt of United States deciding to not honour their commitment. That's sort-of true. It's a bit simplified. The treasury isn't typically the counterparty for these commitments. What they did was ban other entities from honouring their own commitments. So eg if a bank in Singapore didn't want to lose access to the USD ecosystem, they had to cease honouring their commitments to certain Russian entities. That's independent of whether those commitments were specified in USD, Singapore dollars, Euros, British Pounds or pork bellies.
- vishnugupta 4y ago
  Thanks for clarifying about the treasury part. I thought treasury (or the US Govt) had instructed federal reserve to freeze assets of Russian entity. > But not technically true for gold coins In so far as gold is used as money one is indeed relying on rest of humanity/society to accept it in exchange for whatever you need. Granted that for most (all?) of their existence, civilised humans have accepted gold as money because of its use as jewellery and its attractive qualities. But there's still a possibility that some tribe/community will refuse to accept gold as money as they don't have any use value of it. In my mind, money is a promise or a contract which says here's a "thing" I'll give you in exchange for goods or services. The other party could always walk away from that contract or decide to not honour that promise. Gold/cattle etc., have worked as money because they have an intrinsic use value which one could fall back to if it stops working as money. Which brings me to the next point. > ..or bitcoin. I could never understand the intrinsic use value of Bitcoin. People think of it as store of energy or whatever but what is the intrinsic use of Bitcoin? ETH at least is used as a currency to get work done on Ethereum chain so that is its intrinsic use value.

eru 4y ago

Going off on a tangent: All publicly issued stocks in the US are technically owned by one obscure New York company. Your broker has a contractual relationship with them, and you have a contractual relationship with your broker. See https://en.wikipedia.org/wiki/Cede_and_Company https://en.wikipedia.org/wiki/Cede_and_Company Technically, you don't own any (public) shares.

__debugger__ 4y ago

What does owning a dollar even mean? Fundamentally, isn’t your dollar bill also a legal certificate with the Fed?

wahern 4y ago
Once upon a time bills (banknotes) were bearer instruments which could be exchanged with the Treasury for silver. (Or with whatever issuing entity in whatever they promised--typically gold or silver.) A bearer instrument is payable by the drawee to whomever physically presents the instrument. These days the value of bills is solely in being legal tender; that is, an authentic bill can be used for satisfaction of any court-ordered debt. That's not the same thing as requiring people to transact with you using those bills. But if someone sued you in court and gained a judgement against you, then you could use those bills to satisfy the judgement. Example: you ran away with a candy bar after the clerk refused to take your dirty dollar bill. They sue you. The court orders you to pay the store $1, which you can satisfy with an authentic $1 note, even the original dirty note. Maybe the clerk refused the bill because the store only accepts Bitcoin payments. I'm not sure, but the judgment could in theory include whatever costs the store incurred (if any) by being forced to take cash, which you would could also pay in cash. Because ultimately whatever damages or costs were incurred can be satisfied by the jurisdiction's legal currency, in which such damages and costs are also typically denominated.

lordnacho 4y ago

IANAL, but a finance guy. Depositing money is lending money. It's presented like some special thing, but at the end of the day you no longer have your dollar, you have an IOU for a dollar issued by the bank. Yes, you have a deal with the bank that they will give you your money back whenever you want. Now normally there's no point in mincing words, you have 50K at the bank, whatever. But if the bank fails, you still don't have the money in your hands, you are still owed it. What normally happens when a business can't pay back its debts is there's a bankruptcy procedure and everything is frozen until a bankruptcy lawyer parachutes in to handle things. Now keep in mind they are bankrupt because they don't have a way to pay back everyone, so there are laws about how your IOUs are settled. This is called a haircut, because chances are the creditors will not get back the full amounts they're owed. (In rare cases a bankrupt business somehow manages to sell its assets for more than the liabilities.) If it's a bank, there's insurance schemes in various countries to help out the depositors. But the deal is basically that, you are lending money to the bank, and they are lending to other people eg mortgages, business loans, overdrafts, etc. Getting back to your question, there's not a whole lot of meat on the "what does the law say" bone. SVB is dead, carcass is divided up between the creditors.

jbverschoor 4y ago

Maybe the HN crowd will finally understand the value of crypto? Oh wait.. banks and currency are save