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> One part of the bailout is depositors over $250k getting a new FDIC guarantee. Not really. It's not like the FDIC would normally give everyone $250k and then
by twblalock 4y ago
> One part of the bailout is depositors over $250k getting a new FDIC guarantee.
Not really. It's not like the FDIC would normally give everyone $250k and then light the bank's remaining money on fire. If there is money left over after depositors all get their $250k, the depositors have a claim on that money too.
Thought experiment: Consider a bank with only one customer. Let's say that customer had a million dollars in an account. The bank fails. That customer gets $250k. The FDIC finds out that another half a million is left over. The customer gets that too. The shareholders get shafted because they don't get anything because the depositors have precedence over the shareholders. Shareholders are the last ones to get paid, if there is anything left.
This is not a bailout. It's the way things normally work.
- FormerBandmate 4y ago100% of deposits will be covered now tho, instead of 95%
- dmix 4y agoIt always works that way in practice, but I still think announcing the guarantee so early may have been a thing to calm the market. It is likely they just looked at the assets and figured out how to cover it all without dipping into some other gov $$, as part of the sale of the business. And something to do with finding a buyer for the mortgage security that they had (just speculating).
- ZachPruckowski 4y agoLooking at your thought experiment, the difference is whether that customer gets $500K (all of the bank's assets are sold to make him whole[1]) or $1M - all the banks assets are sold, and also he gets another $500K from the FDIC. [1] - the $250K insurance is normally only supposed to apply if there are insufficient assets to cover it. Unless I'm misunderstanding your wording and the bank in the thought experiment has $750K in assets.
- hypothesis 4y agoYour claim appears contradictory to what being reported in financial news though. [0] https://twitter.com/colbyLsmith/status/1635061613920395264 https://twitter.com/colbyLsmith/status/1635061613920395264
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- Thorrez 4y agoThat's supporting the second part of simple-thoughts's comment. It's unclear to me whether twblalock was arguing against that or not.
- hypothesis 4y agoTo me it seems like it is confirming the quote that he was arguing against. Also, here is a POTUS tweet taking credit for a literal depositors “bailout”. [0] https://mobile.twitter.com/POTUS/status/1635080376572956672 https://mobile.twitter.com/POTUS/status/1635080376572956672
- twblalock 4y agoThe President never used the word “bailout”. And that’s because this is not a bailout. Taxpayers aren’t on the hook for a penny, and the money is going to depositors not the people who caused the problem.
- hypothesis 4y agoNow, I have no knowledge if Biden himself tweeted that. But would you retweet something that calls your actions “bailout”? Especially if you don’t want it to be called as such?
- junofan 4y agoThe NYTimes tweet also says federal officials closed a bank, when it was state officials who closed the bank. I don’t think the Biden administration is endorsing the NYTimes weekend social media person’s summary. The article says the Treasury wanted to emphasize that this action is not a bailout.
- Thorrez 4y agoAre you arguing about against just the first part of simple-thoughts's comment, or against both parts?
- opportune 4y agoThe federal reserve purchasing securities at par is money printing/debasement, since those securities have lower fair market values. The increased insurance on everyone else to cover actual losses to unsecured deposits is just a small tax on every other banking customer