4 ms·

That requires congress

ericmay 4y ago
Sure but then if the limit is $250,000 and it requires an act of Congress to raise it how is the FDIC guaranteeing more than that? I know the answer is that they are leveraging a fee across firms, but then it looks like practically the backstop is unlimited while the on paper there is a limit. Overall just not great there.
- roflyear 4y ago
  The effective limit is infinite apparently, but since that can change at the whims of the government (rather than being a requirement) people are looking to increase the limit.
- credit_guy 4y ago
  It looks to me the Fed identified and used some corner case in the law (feel free to substitute loophole for corner case if you wish). During the early weeks of Covid, I was amazed how quickly the Fed created new tools to address the financial crisis that was unfolding [1]. Although I interacted with Fed regulators, I was not close enough to ask them if they pulled all-nighters. It would not surprise me if they did. In fact, that was the only plausible explanation I could find, either that, or some of them are 10x guys. President Biden just gave an address [2] saying that the Fed will work with the Congress to make sure the situation will not repeat. So, yes, you are right, increasing the limit will require an act of Congress, and this will come, but it will take some time. Until then, the new "infinite limit" will be de facto, but not de jure. [1] https://www.americanactionforum.org/insight/timeline-the-federal-reserve-responds-to-the-threat-of-coronavirus/ https://www.americanactionforum.org/insight/timeline-the-fed... [2] https://www.youtube.com/watch?v=dLVbVqqsXF8 https://www.youtube.com/watch?v=dLVbVqqsXF8
  - ericmay 4y ago
    Thanks for sharing that info and the thoughtful reply! As a bit of digression I do believe at some of these institutions such as the FED they have actual 10x employees particularly for emergency situations, playbooks, and really fucking smart people working there just like many other prominent organizations. They probably worked all-nighters too. Wonder when the movie is going to come out on Netflix. Who will play Peter Thiel?
- ashwagary 4y ago
  >I know the answer is that they are leveraging a fee across firms Moral hazard achieved as a precedent has been set. I suspect billions, if not trillions, of dollars are rotating positioning to game this liability displacing outcome. We will find out who gamed it best and what strategies they used in the coming months/years.

Sure but then if the limit is $250,000 and it requires an act of Congress to raise it how is the FDIC guaranteeing more than that? I know the answer is that they are leveraging a fee across firms, but then it looks like practically the backstop is unlimited while the on paper there is a limit. Overall just not great there.

roflyear 4y ago
The effective limit is infinite apparently, but since that can change at the whims of the government (rather than being a requirement) people are looking to increase the limit.
credit_guy 4y ago
It looks to me the Fed identified and used some corner case in the law (feel free to substitute loophole for corner case if you wish). During the early weeks of Covid, I was amazed how quickly the Fed created new tools to address the financial crisis that was unfolding [1]. Although I interacted with Fed regulators, I was not close enough to ask them if they pulled all-nighters. It would not surprise me if they did. In fact, that was the only plausible explanation I could find, either that, or some of them are 10x guys. President Biden just gave an address [2] saying that the Fed will work with the Congress to make sure the situation will not repeat. So, yes, you are right, increasing the limit will require an act of Congress, and this will come, but it will take some time. Until then, the new "infinite limit" will be de facto, but not de jure. [1] https://www.americanactionforum.org/insight/timeline-the-federal-reserve-responds-to-the-threat-of-coronavirus/ https://www.americanactionforum.org/insight/timeline-the-fed... [2] https://www.youtube.com/watch?v=dLVbVqqsXF8 https://www.youtube.com/watch?v=dLVbVqqsXF8
- ericmay 4y ago
  Thanks for sharing that info and the thoughtful reply! As a bit of digression I do believe at some of these institutions such as the FED they have actual 10x employees particularly for emergency situations, playbooks, and really fucking smart people working there just like many other prominent organizations. They probably worked all-nighters too. Wonder when the movie is going to come out on Netflix. Who will play Peter Thiel?
ashwagary 4y ago
>I know the answer is that they are leveraging a fee across firms Moral hazard achieved as a precedent has been set. I suspect billions, if not trillions, of dollars are rotating positioning to game this liability displacing outcome. We will find out who gamed it best and what strategies they used in the coming months/years.