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People are confusing shareholders with demand deposit account holders. Shareholders can and should be wiped out with very little to show for it. That is the ri

People are confusing shareholders with demand deposit account holders. Shareholders can and should be wiped out with very little to show for it. That is the risk they run. Demand deposit holders getting wiped out is unthinkable. Taking any non-negligible haircut on their demand deposits (yes, even over $250k) will destroy confidence in the banking industry. This is far worse than the moral hazard of a bailout. What must be done is not a corporate bailout to protect shareholders, yet tons of people think this is "socializing losses and privatizing gains."

watwut 4y ago
Yes, I agree. Depositors are entirely different issue then shareholders. I think that startups mentioned in this thread are the depositors. Plus it is not just that shareholders took risk, it is also that market incentives push companies into too rules breaking and too much riks. Because it makes shares go up temporarily.
kilburn 4y ago
> Demand deposit holders getting wiped out is unthinkable. Taking any non-negligible haircut on their demand deposits (yes, even over $250k) will destroy confidence in the banking industry. This is far worse than the moral hazard of a bailout. Says who? 2/3 of amercians live paycheck-to-paycheck [1]. The only thing that a banking system has to provide them is day-to-day operations plus a small cushion (much smaller than 250k). For that people accumulating over 250k is a privilege, one thay may as well come with the risk of getting it wiped out in very rare events such as this one. [1] https://www.prnewswire.com/news-releases/23-of-the-us-population-now-lives-paycheck-to-paycheck-301536811.html https://www.prnewswire.com/news-releases/23-of-the-us-popula... > yet tons of people think this is "socializing losses and privatizing gains." Think about the 2/3rds of americans above. Why shouldn't they think that?
- icelancer 4y ago
  > Think about the 2/3rds of americans above. Why shouldn't they think that? Because: > 2/3 of amercians live paycheck-to-paycheck [1]. Their paychecks are drawn from these demand deposit accounts. This money above $250k is not being stored in an account like Scrooge McDuck just trying to get the highest score. This money is being held in a transitive fashion to pay employees, vendors, and lines of credit. This is what people are not understanding.
mcculley 4y ago
Nobody should have complete confidence in a bank. When I was young, I worked for a guy who ran multiple businesses and used multiple banks. He showed me how he balanced his treasury across multiple banks and instruments to minimize risk. He had lived through the Great Depression and seen banks fail. I took his advice seriously and have always used multiple banks. I am always concerned when any one account is higher than the FDIC limit. This requires cash flow planning and long term instruments, but it is what one has to do in this world.
- pas 4y ago
  and this is a dumb waste of resources/time/money/energy. the government should run a safe and boring bank for people and small businesses. no loans, no credit cards, just deposits (and allow people to buy safe bonds/ETFs through other banks). they are already going to guarantee most accounts anyway.

watwut 4y ago

Yes, I agree. Depositors are entirely different issue then shareholders. I think that startups mentioned in this thread are the depositors. Plus it is not just that shareholders took risk, it is also that market incentives push companies into too rules breaking and too much riks. Because it makes shares go up temporarily.

kilburn 4y ago

> Demand deposit holders getting wiped out is unthinkable. Taking any non-negligible haircut on their demand deposits (yes, even over $250k) will destroy confidence in the banking industry. This is far worse than the moral hazard of a bailout. Says who? 2/3 of amercians live paycheck-to-paycheck [1]. The only thing that a banking system has to provide them is day-to-day operations plus a small cushion (much smaller than 250k). For that people accumulating over 250k is a privilege, one thay may as well come with the risk of getting it wiped out in very rare events such as this one. [1] https://www.prnewswire.com/news-releases/23-of-the-us-population-now-lives-paycheck-to-paycheck-301536811.html https://www.prnewswire.com/news-releases/23-of-the-us-popula... > yet tons of people think this is "socializing losses and privatizing gains." Think about the 2/3rds of americans above. Why shouldn't they think that?

icelancer 4y ago
> Think about the 2/3rds of americans above. Why shouldn't they think that? Because: > 2/3 of amercians live paycheck-to-paycheck [1]. Their paychecks are drawn from these demand deposit accounts. This money above $250k is not being stored in an account like Scrooge McDuck just trying to get the highest score. This money is being held in a transitive fashion to pay employees, vendors, and lines of credit. This is what people are not understanding.

mcculley 4y ago

Nobody should have complete confidence in a bank. When I was young, I worked for a guy who ran multiple businesses and used multiple banks. He showed me how he balanced his treasury across multiple banks and instruments to minimize risk. He had lived through the Great Depression and seen banks fail. I took his advice seriously and have always used multiple banks. I am always concerned when any one account is higher than the FDIC limit. This requires cash flow planning and long term instruments, but it is what one has to do in this world.

pas 4y ago
and this is a dumb waste of resources/time/money/energy. the government should run a safe and boring bank for people and small businesses. no loans, no credit cards, just deposits (and allow people to buy safe bonds/ETFs through other banks). they are already going to guarantee most accounts anyway.