4 ms·
With this news, I'm opening a bank. Here is my business plan: 1. Make risky investments and offer better terms than other banks 2. Watch business flock to
by Dem_Boys 4y ago
With this news, I'm opening a bank. Here is my business plan:
1. Make risky investments and offer better terms than other banks
2. Watch business flock to me
3. Get filthy rich on yearly bonuses
4. 10 years later my risky investments blow up (Make sure to sell stock before)
5. Get taken over by the FDIC
6. Don't return those years of bonuses
7. Let other banks pay for my wrongdoing with a "special assessment"
8. Walk away as a filthy rich failed bank executive
- dpkirchner 4y ago9. Get hired by another bank as CFO (See Lehman Brothers/SVB for a tutorial) 10. Repeat
- BCM43 4y agoIs this any different without steps 5 and 7? I don't understand how the FDIC actions change the incentives here.
- paulddraper 4y agoPresumably, #2 is only possible with a government guarantee for depositors.
- auntienomen 4y agoCan't do 8 without those!
- rullelito 4y agoA lot of people would lose money and the system would have to change.
- fidgewidge 4y agoWay fewer people hate you at the end, which is a meaningful disincentive otherwise.
- Dem_Boys 4y agoThe FDIC's actions indicate that the insured deposit limit is really unlimited instead of the advertised $250,000. This takes away a huge risk associated with recklessly handling depositors money because now the FDIC will swoop in and make ALL depositors whole.
- IAmGraydon 4y agoThis is really the typical arc of a hedge fund far more often than banks.
- oldgradstudent 4y agoNot very original. It's been done over and over again during the S&L crisis and later. The Best Way to Rob a Bank is to Own One. https://www.brookings.edu/bpea-articles/looting-the-economic-underworld-of-bankruptcy-for-profit/ https://www.brookings.edu/bpea-articles/looting-the-economic...
- paulddraper 4y agoPresumably, #2 is only possible with a government guarantee for depositors.