5 ms·

The decisions about "is this bank adequately capitalized to serve its depositors" should be made by the regulators, not by the market. We know what it takes to

The decisions about "is this bank adequately capitalized to serve its depositors" should be made by the regulators, not by the market. We know what it takes to run a bank safely, and its really easy to both quantify and test. This is how the "too big to fail" banks are run today. No one talks about the moral hazard of elevators (make sure you inspect it before you get on) or airplanes (make sure you do your own pre flight check) we trust that the regulators have set up processes that make this infrastructure safe for the public to use. Even with a deposit guarantee, a poorly run bank can still be closed by regulators, a bank run doesn't need to happen for a bank to be shut down, just like an elevator accident doesn't need to happen to decertify an elevator in a building.

zupreme 4y ago
Consider: “Reserve requirements are a tool used by the central bank to increase or decrease the money supply in the economy and influence interest rates. Reserve requirements are currently set at ZERO as a response to the COVID-19 pandemic.” ref: https://www.investopedia.com/terms/r/requiredreserves.asp https://www.investopedia.com/terms/r/requiredreserves.asp
- tick_tock_tick 4y ago
  A mean reserve requirements are stupid and have no place in real risk assessment so that's a good thing.
  - 8note 4y ago
    How so?
    - hellojesus 4y ago
      I don't think it necessarily is adjusted for risk that specific banks take on as operators. It's likely set at some requirement to help the fed achieve its goal while also adjusting for median or 2 std dev risk.
DubiousPusher 4y ago
It doesn't take a CPA to know that depositing above 250k comes with increased risk. And I think you're kind of conflating types of consumers here. People depositing above that limit are generally not working from the same limitations and lack of information that regular people are.
- poof131 4y ago
  Exactly. Circle and USDC are essentially a bank themselves, and those deposits were just guaranteed. Risk free return.
- eric_cc 4y ago
  > People depositing above that limit are generally not working from the same limitations and lack of information that regular people are. 250k is not that much money. What a weird statement.
  - TimTheTinker 4y ago
    Feels like a lot to me. That's more than a year's wages.
    - eric_cc 4y ago
      Consider financially responsible people in their 50’s and 60’s that have had decades to save. There are plenty of “regular”, middle class people with this type of savings in their account.
      - DubiousPusher 4y ago
        If you have that much in liquid cash, you meet virtually no definition of the term "middle class". You are upper middle class at leadt and you probably have a financial advisor who is telling you that you shouldn't locate all your money in one account unless it is yielding in a way that justifies such a risk. At least I hope you do.
chernevik 4y ago
And so the regulators are empowered to make a whole bunch of other decisions, such as asset and lending strategy. I prefer to minimize regulators' control over decisions. Perhaps you have noticed that regulators are at bottom politicians?
- kazen44 4y ago
  at the end of the day, everything in life is political. Did you also consider that the political incentive for a regulator are at odds with the ones running the bussiness. (mainly, not getting people killed).
- TheOtherHobbes 4y ago
  I prefer to minimise banking's influence over everything, because banking is itself a form of political regulation - but not a democratically accountable one.
lmm 4y ago
At this point we should just nationalize the whole banking system. Currently we have the worst of both worlds: privatised profits and socialised losses; strict regulations but limited oversight or appeal; no real market competition but no real voter influence either.
- 0xB31B1B 4y ago
  we don't have "socialized losses". Tax payers aren't paying for anything here. The FDIC is run an funded by an interbank consortium. Its essential a union of banks that run a collective risk pool and decide the rules of the risk pool. It works and has worked for nearly 100 years.
  - lmm 4y ago
    > we don't have "socialized losses". Tax payers aren't paying for anything here. The FDIC is run an funded by an interbank consortium. Its essential a union of banks that run a collective risk pool and decide the rules of the risk pool. What meaningful distinction are you drawing here? It's not practical to opt out of banking, and FDIC has no real competition (the NCUA offers exactly the same terms, and in the credit union thread fans were at pains to emphasise how equivalent to the FDIC it is). Not all taxes are collected by governments from individuals.
    - lostmsu 4y ago
      Cryptos?
      - hellojesus 4y ago
        People will be taxed for this through inflation. Where else does the money come from during a QT cycle? I haven't looked into the details for how this will be paid, but that would be my initial guess.

zupreme 4y ago

Consider: “Reserve requirements are a tool used by the central bank to increase or decrease the money supply in the economy and influence interest rates. Reserve requirements are currently set at ZERO as a response to the COVID-19 pandemic.” ref: https://www.investopedia.com/terms/r/requiredreserves.asp https://www.investopedia.com/terms/r/requiredreserves.asp

tick_tock_tick 4y ago
A mean reserve requirements are stupid and have no place in real risk assessment so that's a good thing.
- 8note 4y ago
  How so?
  - hellojesus 4y ago
    I don't think it necessarily is adjusted for risk that specific banks take on as operators. It's likely set at some requirement to help the fed achieve its goal while also adjusting for median or 2 std dev risk.

DubiousPusher 4y ago

It doesn't take a CPA to know that depositing above 250k comes with increased risk. And I think you're kind of conflating types of consumers here. People depositing above that limit are generally not working from the same limitations and lack of information that regular people are.

poof131 4y ago
Exactly. Circle and USDC are essentially a bank themselves, and those deposits were just guaranteed. Risk free return.
eric_cc 4y ago
> People depositing above that limit are generally not working from the same limitations and lack of information that regular people are. 250k is not that much money. What a weird statement.
- TimTheTinker 4y ago
  Feels like a lot to me. That's more than a year's wages.
  - eric_cc 4y ago
    Consider financially responsible people in their 50’s and 60’s that have had decades to save. There are plenty of “regular”, middle class people with this type of savings in their account.
    - DubiousPusher 4y ago
      If you have that much in liquid cash, you meet virtually no definition of the term "middle class". You are upper middle class at leadt and you probably have a financial advisor who is telling you that you shouldn't locate all your money in one account unless it is yielding in a way that justifies such a risk. At least I hope you do.

chernevik 4y ago

And so the regulators are empowered to make a whole bunch of other decisions, such as asset and lending strategy. I prefer to minimize regulators' control over decisions. Perhaps you have noticed that regulators are at bottom politicians?

kazen44 4y ago
at the end of the day, everything in life is political. Did you also consider that the political incentive for a regulator are at odds with the ones running the bussiness. (mainly, not getting people killed).
TheOtherHobbes 4y ago
I prefer to minimise banking's influence over everything, because banking is itself a form of political regulation - but not a democratically accountable one.

lmm 4y ago

At this point we should just nationalize the whole banking system. Currently we have the worst of both worlds: privatised profits and socialised losses; strict regulations but limited oversight or appeal; no real market competition but no real voter influence either.

0xB31B1B 4y ago
we don't have "socialized losses". Tax payers aren't paying for anything here. The FDIC is run an funded by an interbank consortium. Its essential a union of banks that run a collective risk pool and decide the rules of the risk pool. It works and has worked for nearly 100 years.
- lmm 4y ago
  > we don't have "socialized losses". Tax payers aren't paying for anything here. The FDIC is run an funded by an interbank consortium. Its essential a union of banks that run a collective risk pool and decide the rules of the risk pool. What meaningful distinction are you drawing here? It's not practical to opt out of banking, and FDIC has no real competition (the NCUA offers exactly the same terms, and in the credit union thread fans were at pains to emphasise how equivalent to the FDIC it is). Not all taxes are collected by governments from individuals.
  - lostmsu 4y ago
    Cryptos?
    - hellojesus 4y ago
      People will be taxed for this through inflation. Where else does the money come from during a QT cycle? I haven't looked into the details for how this will be paid, but that would be my initial guess.