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>If those deposits are guaranteed by the government, and backstopped by the government "Any losses to the Deposit Insurance Fund to support uninsured depositor

>If those deposits are guaranteed by the government, and backstopped by the government "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Does this mean all American banks (indirectly bank customers) will pay to cover depositor losses that exceed insurance funds?

Godel_unicode 4y ago
Not sure why you’re being downvoted, that analysis is correct.
- ashwagary 4y ago
  "It's not all tax payers, just all tax payers with bank accounts", which is basically all tax payers. Sounds like word games played by people in charge to have tax payer bailouts using two layers of obfuscation.
  - muzz 4y ago
    And also "people with bank accounts who don't make enough to pay taxes" like my grandma.
    - Godel_unicode 4y ago
      Yeah, the fees and lower interest rates from this will be pretty brutal for the poor. Not using tax dollars is actually pretty regressive.
      - notfromhere 4y ago
        Most people get so little interest from their accounts that it is basically immaterial
      - piyh 4y ago
        They only need to cover 20 billion or so for SVB? In the grand scheme of all banks, that's not a ton. SVB wasn't some FTX oops it's all gone level fraud. Assuming it's a one time charge and not a contagion, it sounds like why we have government and FDIC.
        muzz 4y ago
        $20 Billion is roughly $60 for every person in the country It's more the state government budget for about 1/3 of the states in the union
        piyh 4y ago
        128 billion in the FDIC reserves as of December 2022. Better than letting more dominoes fall if you're trying to preserve that insurance pool.
      - davidgay 4y ago
        > Yeah, the fees and lower interest rates from this will be pretty brutal for the poor. I'm fairly sure the poor aren't that affected by interest rates - the very definition of being poor is not owning much in the way of assets that could earn interest...
        ashwagary 4y ago
        It's not only the earned interest on savings being discussed here, the OP was also including higher interest rates on the variable rate loans that most poorer borrowers qualify for.
      - op00to 4y ago
        5 basis points was the last special assessment in 2009. Would you seriously notice a 0.05% lower rate of return on your account?
    - ericd 4y ago
      Normal/poor people don't put enough money into banks for it to represent much of their earnings. IIRC, from that image that was circulating around, much less than half of the deposits of even BofA are from accounts <$250k. So I don't think accounts like your grandma's are going to bear any percentage of the brunt of this.
      - pooper 4y ago
        > Normal/poor people don't put enough money into banks for it to represent much of their earnings. This is hurtful in more ways than one. Banks routinely charge all kinds of fees from account maintenance to whatever Wells Fargo did for years. Retail banks won't let the Federal Reserve open a bank account for everyone by default with the Fed. Either what you say is true and the retail customers are insignificant, and banks must offer no fee accounts. If not, they can't block federal reserve from creating default USD accounts for everyone. Or they are an important part of the bank's marketing strategy or whatever. In this case, banks must lose the ability to gamble customer funds. Which one is it?
        rocqua 4y ago
        > Retail banks won't let the Federal Reserve open a bank account for everyone by default with the Fed. Actually the FED is opposed to this themselves. A company called the narrow bank was going to try this. The FED refused them a banking license, all the way to court. The FED wants deposits reinvested into the economy.
        afiori 4y ago
        Quoting from: https://www.econlib.org/why-does-the-fed-oppose-narrow-banking/ https://www.econlib.org/why-does-the-fed-oppose-narrow-banki... > A narrow bank takes deposits and invests the money in interest-bearing reserves deposited at the Fed. Because that’s all these banks would do, they would be very low cost and hence could pass along to depositors the interest earned on reserves, minus a small fee. > Narrow banks could attract many large depositors, who currently receive much lower interest rates on their deposits at ordinary commercial banks. It feels like they were offloading their cost to a service that the government maybe offers at a loss.
  - deleted 4y ago
    [deleted]
  - om2 4y ago
    An assessment on banks costs shareholders of the bank, not accountholders. (Maybe it indirectly costs accountholders if banks lower interest rates on customer deposits, but these rates are generally not affected by a small short term shock). It might seem unfair that shareholders of random other banks have to pay for this but no more unfair than accountholders of SVB paying for it.
  - wolverine876 4y ago
    More of the population lacks banking services than you think. According to a pre-pandemic report, IIRC, very large number have <$600 savings.
    - BlueTemplar 4y ago
      Being unbanked is on a whole other level : no cheques, no debit cards, savings vulnerable to theft...
  - nostromo 4y ago
    They’re spinning it because no politician or appointee wants to be on record as bailing out Silicon Valley, venture capitalists and Crypto. But the end result is the same: a tax on everyone to bail out Peter Thiel and friends.
dkjaudyeqooe 4y ago
> (indirectly bank customers) That's not a given since it may just reduce profits. Banking is a very competitive environment.
- ashwagary 4y ago
  >That's not a given since it may just reduce profits. Banking is a very competitive environment. So the options are: 1. Banks eat the cost. 2. Banks take on more risk to cover the cost (putting the whole system at more risk). 3. Banks increase customer fees, interest rates, etc... I don't have a crystal ball but I have a strong guess about which of these options are most likely to be implemented. Not only will tax payers likely pay for this but the most likely tax payers to pay are the ones with the least flexibility (stuck with variable rate debt, limited banking choices, no dedicated money managers working on their behalf) aka the poorest tax payers. If my assessment is correct, they have somehow found and settled on a solution more disgusting than a generally distributed tax payer bailout.
  - machina_ex_deus 4y ago
    4) Banks get their privileges revoked and they are no longer an oligopoly with privileges of being the only way to store dollars legally, and the only investment institutions who get to gamble their customers money while the government is insuring their loses but does nothing about their gains. The Fed releases a digital dollar that you can bank without needing to be a part of this oligopoly. Banks are forced to give better terms to be attractive again, terms that will make up for the risk of the bank using your money. Deposits are no longer guaranteed because being in a bank is now a deliberate choice instead of something you're forced to do despite having money. Banking is not competitive in any way. The small players are very risky to bank at. The big players get to be riskier because they are protected by the government.
  - op00to 4y ago
    The last time a special assessment was required, the cost was 5 basis points of deposits. Would you notice a 0.05% increase in fees?
wolverine876 4y ago
> Does this mean all American banks (indirectly bank customers) will pay to cover depositor losses that exceed insurance funds? That assumes banks balance this liability by reducing payments to customers rather than reducing profits. That's a common and completely misleading claim by businesses - if they are taxed or fined, they pass it on to their customers (obviously, it's an attempt to create political support for the business). The reality is that the ability to raise prices (or lower interest rates on deposits) depends on the elasticity. If you raise prices on your bottle of water at the supermarket, then people will just buy the bottle next to it - the water-maker will be paying and fee or tax increases out of their profits. If you have the only bottle of water in the desert, you can charge whatever you want. I would think that regular savings deposits, at least, are easily moved to another bank. Another consideration is that if they could squeeze more out of customers, they'd probably already be doing it. By that theory, at least, they've already optimized or that and can't charge more.
- polygamous_bat 4y ago
  > If you raise prices on your bottle of water at the supermarket, then people will just buy the bottle next to it - the water-maker will be paying and fee or tax increases out of their profits. If you have the only bottle of water in the desert, you can charge whatever you want. I would think that regular savings deposits, at least, are easily moved to another bank. However, this fee is levied on all member banks of FDIC, which is basically every bank. Thus, it creates the most natural ground for collusion, i.e. everyone implicitly agrees to pass on the fees to the customers. More than that, a bank account is probably one of the stickiest "purchases" an average individual makes in their lives, unlike a single-use water bottle. How many people do you think has the time and energy to switch to a new bank every time there is a fee increase? Is it the individual's fault for not doing so?
  - op00to 4y ago
    The fee is not the same for all banks. FDIC assessments are based on risk. Riskier banks pay more, safer banks pay less. Would you notice a 5 basis point change in your savings account?

Godel_unicode 4y ago

Not sure why you’re being downvoted, that analysis is correct.

ashwagary 4y ago
"It's not all tax payers, just all tax payers with bank accounts", which is basically all tax payers. Sounds like word games played by people in charge to have tax payer bailouts using two layers of obfuscation.
- muzz 4y ago
  And also "people with bank accounts who don't make enough to pay taxes" like my grandma.
  - Godel_unicode 4y ago
    Yeah, the fees and lower interest rates from this will be pretty brutal for the poor. Not using tax dollars is actually pretty regressive.
    - notfromhere 4y ago
      Most people get so little interest from their accounts that it is basically immaterial
    - piyh 4y ago
      They only need to cover 20 billion or so for SVB? In the grand scheme of all banks, that's not a ton. SVB wasn't some FTX oops it's all gone level fraud. Assuming it's a one time charge and not a contagion, it sounds like why we have government and FDIC.
      - muzz 4y ago
        $20 Billion is roughly $60 for every person in the country It's more the state government budget for about 1/3 of the states in the union
        piyh 4y ago
        128 billion in the FDIC reserves as of December 2022. Better than letting more dominoes fall if you're trying to preserve that insurance pool.
    - davidgay 4y ago
      > Yeah, the fees and lower interest rates from this will be pretty brutal for the poor. I'm fairly sure the poor aren't that affected by interest rates - the very definition of being poor is not owning much in the way of assets that could earn interest...
      - ashwagary 4y ago
        It's not only the earned interest on savings being discussed here, the OP was also including higher interest rates on the variable rate loans that most poorer borrowers qualify for.
    - op00to 4y ago
      5 basis points was the last special assessment in 2009. Would you seriously notice a 0.05% lower rate of return on your account?
  - ericd 4y ago
    Normal/poor people don't put enough money into banks for it to represent much of their earnings. IIRC, from that image that was circulating around, much less than half of the deposits of even BofA are from accounts <$250k. So I don't think accounts like your grandma's are going to bear any percentage of the brunt of this.
    - pooper 4y ago
      > Normal/poor people don't put enough money into banks for it to represent much of their earnings. This is hurtful in more ways than one. Banks routinely charge all kinds of fees from account maintenance to whatever Wells Fargo did for years. Retail banks won't let the Federal Reserve open a bank account for everyone by default with the Fed. Either what you say is true and the retail customers are insignificant, and banks must offer no fee accounts. If not, they can't block federal reserve from creating default USD accounts for everyone. Or they are an important part of the bank's marketing strategy or whatever. In this case, banks must lose the ability to gamble customer funds. Which one is it?
      - rocqua 4y ago
        > Retail banks won't let the Federal Reserve open a bank account for everyone by default with the Fed. Actually the FED is opposed to this themselves. A company called the narrow bank was going to try this. The FED refused them a banking license, all the way to court. The FED wants deposits reinvested into the economy.
        afiori 4y ago
        Quoting from: https://www.econlib.org/why-does-the-fed-oppose-narrow-banking/ https://www.econlib.org/why-does-the-fed-oppose-narrow-banki... > A narrow bank takes deposits and invests the money in interest-bearing reserves deposited at the Fed. Because that’s all these banks would do, they would be very low cost and hence could pass along to depositors the interest earned on reserves, minus a small fee. > Narrow banks could attract many large depositors, who currently receive much lower interest rates on their deposits at ordinary commercial banks. It feels like they were offloading their cost to a service that the government maybe offers at a loss.
- deleted 4y ago
  [deleted]
- om2 4y ago
  An assessment on banks costs shareholders of the bank, not accountholders. (Maybe it indirectly costs accountholders if banks lower interest rates on customer deposits, but these rates are generally not affected by a small short term shock). It might seem unfair that shareholders of random other banks have to pay for this but no more unfair than accountholders of SVB paying for it.
- wolverine876 4y ago
  More of the population lacks banking services than you think. According to a pre-pandemic report, IIRC, very large number have <$600 savings.
  - BlueTemplar 4y ago
    Being unbanked is on a whole other level : no cheques, no debit cards, savings vulnerable to theft...
- nostromo 4y ago
  They’re spinning it because no politician or appointee wants to be on record as bailing out Silicon Valley, venture capitalists and Crypto. But the end result is the same: a tax on everyone to bail out Peter Thiel and friends.

dkjaudyeqooe 4y ago

> (indirectly bank customers) That's not a given since it may just reduce profits. Banking is a very competitive environment.

ashwagary 4y ago
>That's not a given since it may just reduce profits. Banking is a very competitive environment. So the options are: 1. Banks eat the cost. 2. Banks take on more risk to cover the cost (putting the whole system at more risk). 3. Banks increase customer fees, interest rates, etc... I don't have a crystal ball but I have a strong guess about which of these options are most likely to be implemented. Not only will tax payers likely pay for this but the most likely tax payers to pay are the ones with the least flexibility (stuck with variable rate debt, limited banking choices, no dedicated money managers working on their behalf) aka the poorest tax payers. If my assessment is correct, they have somehow found and settled on a solution more disgusting than a generally distributed tax payer bailout.
- machina_ex_deus 4y ago
  4) Banks get their privileges revoked and they are no longer an oligopoly with privileges of being the only way to store dollars legally, and the only investment institutions who get to gamble their customers money while the government is insuring their loses but does nothing about their gains. The Fed releases a digital dollar that you can bank without needing to be a part of this oligopoly. Banks are forced to give better terms to be attractive again, terms that will make up for the risk of the bank using your money. Deposits are no longer guaranteed because being in a bank is now a deliberate choice instead of something you're forced to do despite having money. Banking is not competitive in any way. The small players are very risky to bank at. The big players get to be riskier because they are protected by the government.
- op00to 4y ago
  The last time a special assessment was required, the cost was 5 basis points of deposits. Would you notice a 0.05% increase in fees?

wolverine876 4y ago

> Does this mean all American banks (indirectly bank customers) will pay to cover depositor losses that exceed insurance funds? That assumes banks balance this liability by reducing payments to customers rather than reducing profits. That's a common and completely misleading claim by businesses - if they are taxed or fined, they pass it on to their customers (obviously, it's an attempt to create political support for the business). The reality is that the ability to raise prices (or lower interest rates on deposits) depends on the elasticity. If you raise prices on your bottle of water at the supermarket, then people will just buy the bottle next to it - the water-maker will be paying and fee or tax increases out of their profits. If you have the only bottle of water in the desert, you can charge whatever you want. I would think that regular savings deposits, at least, are easily moved to another bank. Another consideration is that if they could squeeze more out of customers, they'd probably already be doing it. By that theory, at least, they've already optimized or that and can't charge more.

polygamous_bat 4y ago
> If you raise prices on your bottle of water at the supermarket, then people will just buy the bottle next to it - the water-maker will be paying and fee or tax increases out of their profits. If you have the only bottle of water in the desert, you can charge whatever you want. I would think that regular savings deposits, at least, are easily moved to another bank. However, this fee is levied on all member banks of FDIC, which is basically every bank. Thus, it creates the most natural ground for collusion, i.e. everyone implicitly agrees to pass on the fees to the customers. More than that, a bank account is probably one of the stickiest "purchases" an average individual makes in their lives, unlike a single-use water bottle. How many people do you think has the time and energy to switch to a new bank every time there is a fee increase? Is it the individual's fault for not doing so?
- op00to 4y ago
  The fee is not the same for all banks. FDIC assessments are based on risk. Riskier banks pay more, safer banks pay less. Would you notice a 5 basis point change in your savings account?