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All banks take risks with the money that their customers deposit with them. Sometimes those risks are bad, and banks cannot fulfill their obligations to their

All banks take risks with the money that their customers deposit with them. Sometimes those risks are bad, and banks cannot fulfill their obligations to their customers, so the FDIC, which is funded by banks (its deposit insurance) steps in and fixes a bank so that customers of that bank do not get screwed by picking a bad bank. I dont see how any peasants are 'sharing any risk' here. Everybody who held stock in SVB, just lost literally all of that. They invested in a bank that failed. Just like if they invested in a company that failed. Nobody is bailing those people out.

noobermin 4y ago
My understanding is the FDIC reimbursing up to 100K is fine and what you expect, it's just that many customers had balances exceeding that.
- RayVR 4y ago
  Just note that the FDIC provides deposit insurance up to $250k per named individual on the account. So joint accounts with married couples would be $500k. You can add children to increase as well.
  - tetrahedr0n 4y ago
    Also, holding all of your fiat in a single bank or financial instrument is usually not a great idea. Diversification is important to any relatively stable financial position. E.g: Fiat over $500k in a single institution is likely not earning as much as it could and runs the risk of loss of access to funds for X amount of time if the bank fails, until reimbursement happens. But $100k each in 2 different banks leaves you with $300k to invest however you see fit and still have enough liquidity to move quickly on opportunities.
  - noobermin 4y ago
    Just shows how much I know...you can tell I'm not a rich man, I did not even realize it was increased to 250K in the wake of the financial crisis.
Lionga 4y ago
Anyone having a bank account will pay for it trough the banks fees/rates etc. Yellen avoided directly using tax money for the bail out, but it just is the next closest thing.
- tgma 4y ago
  It really isn't though. Sure, at some level of abstraction, someone, somewhere, will have to pay for it, but this is clearly distinct from one's capacity as a taxpayer. All banks, however, benefit from the trust in banking system, so make sense for them to foot the bill. It's unclear how much of that will directly materially affect the average US depositor compared to letting SVB clients lose their shirt and thus erode the trust of the entire banking system.
  - RandomLensman 4y ago
    If in the end the government is needed to (at least temporarily) backstop any deposits anyway, then why have commercial banks for deposits in the first place? Might was well give anyone an account at the Fed or something like that and fund loans and other assets at commercial banks out of bonds, CDs, etc. and never deposits.
    - hackernewds 4y ago
      [flagged]
    - toyg 4y ago
      > Might was well give anyone an account at the Fed or something like that That's an interesting proposition, that was simply unfeasible from a practical perspective until very recently. A consumer bank needed branches, and tills, and vaults, and all sorts of things to serve customers, so it was just unfeasible for most nation-states to eat the costs of all that - while private entities were incentivised to set all of that up so that they could raise money to invest for their own profit. Now that money is increasingly a purely digital construct, a true National Bank could actually be feasible at low cost, providing a 100% safe deposit system for consumers that will never pay any interest. Private banks would likely still exist, they'd just provide more incentives to depositors (i.e. higher returns). This would make private banks a bit less central to the whole system, and make society a bit more fault-tolerant in this area. It's an interesting policy proposition, and maybe talking about it would be a bit more productive than the average thread on banks.
friend_and_foe 4y ago
Alright, now what about this: > Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. That sounds a lot like some type of bailout to me. What does "make funding available" mean? Where does that funding come from? It's going directly to banks, not to depositors. How does that work?
- tetrahedr0n 4y ago
  I believe that would be the FDIC, which is funded by banks (its deposit insurance), right?
- azernik 4y ago
  It's the Fed. It literally prints money and loans it out. And it's doing this to replace money erased during a bank run, so no inflation implications.
  - julienfr112 4y ago
    if the FED prints monney, it creates inflation. If it does not, it does not save SVB depositors.
    - azernik 4y ago
      Inflation occurs when more money is being used to buy things. The SVB depositors are going to turn around and put their money in a new bank.
  - jonhohle 4y ago
    Printing money and loaning it out is literally monetary inflation. Money isn’t erased during a bank run. It’s given back to the owners who always had a right to have it. Fractional reserve banking is what erases money.
    - azernik 4y ago

noobermin 4y ago

My understanding is the FDIC reimbursing up to 100K is fine and what you expect, it's just that many customers had balances exceeding that.

RayVR 4y ago
Just note that the FDIC provides deposit insurance up to $250k per named individual on the account. So joint accounts with married couples would be $500k. You can add children to increase as well.
- tetrahedr0n 4y ago
  Also, holding all of your fiat in a single bank or financial instrument is usually not a great idea. Diversification is important to any relatively stable financial position. E.g: Fiat over $500k in a single institution is likely not earning as much as it could and runs the risk of loss of access to funds for X amount of time if the bank fails, until reimbursement happens. But $100k each in 2 different banks leaves you with $300k to invest however you see fit and still have enough liquidity to move quickly on opportunities.
- noobermin 4y ago
  Just shows how much I know...you can tell I'm not a rich man, I did not even realize it was increased to 250K in the wake of the financial crisis.

Lionga 4y ago

Anyone having a bank account will pay for it trough the banks fees/rates etc. Yellen avoided directly using tax money for the bail out, but it just is the next closest thing.

tgma 4y ago
It really isn't though. Sure, at some level of abstraction, someone, somewhere, will have to pay for it, but this is clearly distinct from one's capacity as a taxpayer. All banks, however, benefit from the trust in banking system, so make sense for them to foot the bill. It's unclear how much of that will directly materially affect the average US depositor compared to letting SVB clients lose their shirt and thus erode the trust of the entire banking system.
- RandomLensman 4y ago
  If in the end the government is needed to (at least temporarily) backstop any deposits anyway, then why have commercial banks for deposits in the first place? Might was well give anyone an account at the Fed or something like that and fund loans and other assets at commercial banks out of bonds, CDs, etc. and never deposits.
  - hackernewds 4y ago
    [flagged]
  - toyg 4y ago
    > Might was well give anyone an account at the Fed or something like that That's an interesting proposition, that was simply unfeasible from a practical perspective until very recently. A consumer bank needed branches, and tills, and vaults, and all sorts of things to serve customers, so it was just unfeasible for most nation-states to eat the costs of all that - while private entities were incentivised to set all of that up so that they could raise money to invest for their own profit. Now that money is increasingly a purely digital construct, a true National Bank could actually be feasible at low cost, providing a 100% safe deposit system for consumers that will never pay any interest. Private banks would likely still exist, they'd just provide more incentives to depositors (i.e. higher returns). This would make private banks a bit less central to the whole system, and make society a bit more fault-tolerant in this area. It's an interesting policy proposition, and maybe talking about it would be a bit more productive than the average thread on banks.

friend_and_foe 4y ago

Alright, now what about this: > Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. That sounds a lot like some type of bailout to me. What does "make funding available" mean? Where does that funding come from? It's going directly to banks, not to depositors. How does that work?

tetrahedr0n 4y ago
I believe that would be the FDIC, which is funded by banks (its deposit insurance), right?
azernik 4y ago
It's the Fed. It literally prints money and loans it out. And it's doing this to replace money erased during a bank run, so no inflation implications.
- julienfr112 4y ago
  if the FED prints monney, it creates inflation. If it does not, it does not save SVB depositors.
  - azernik 4y ago
    Inflation occurs when more money is being used to buy things. The SVB depositors are going to turn around and put their money in a new bank.
- jonhohle 4y ago
  Printing money and loaning it out is literally monetary inflation. Money isn’t erased during a bank run. It’s given back to the owners who always had a right to have it. Fractional reserve banking is what erases money.
  - azernik 4y ago