3 ms·
Why would customers being made whole (at the cost of wiping out all equity and possibly at some cost to other banks) affect the incentives of banks in this kind
by om2 4y ago
Why would customers being made whole (at the cost of wiping out all equity and possibly at some cost to other banks) affect the incentives of banks in this kind of situation? What would banks do differently if account holders could lose everything over $250k? If they are happy to “gamble with 10x leverage” then presumably they don’t care about impact to their customers. If bank management risked jail time that might change incentives but doing that doesn’t seem to require a cost to account holders.
- yunwal 4y agoCustomers should be diversifying in these situations. It’s easy enough to set up a sweep. Those that don’t for whatever reason shouldn’t get bailed out for their poor decision making. That’s de facto subsidizing any future banks that want to make risky investments.
- baq 4y agoIf you blow up so badly you break the world people you want to like you stop liking you.