4 ms·

I think it's fine if the new precedent we're setting is that the FDIC backs any amount of money on deposit for everyone going forward. If that is not the new p

I think it's fine if the new precedent we're setting is that the FDIC backs any amount of money on deposit for everyone going forward. If that is not the new precedent, then this is a bailout of rich individuals and some specific corporations. That doesn't seem a problem to you? If the savings and loan of Bismarck North Dakota fails, is the government bailing out the car lot owner and the wheat farmer and the home builder?

danans 4y ago
> If the savings and loan of Bismarck North Dakota fails, is the government bailing out the car lot owner and the wheat farmer and the home builder? Yes, the depositors would get bailed out, but the bank itself would be sold for parts. That might constrain the way that retail deposits are allowed to be managed. A start would be undoing the Trump administration's rollback of Dodd-Frank stress testing requirements for smaller banks [1]. It will probably also mean the FDIC will require more insurance on deposits. This will all hurt profitability of banks, and reduce risk for depositors. 1. https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rolling-back-some-dodd-frank-regulations.html https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...
- DubiousPusher 4y ago
  > Yes, the depositors would get bailed out, Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here.
  - danans 4y ago
    > Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here. Yes, the special situation will likely become the new normal. There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration (with the help of many banking-industry-aligned Democrats) eliminated in 2018 for banks with < $250M in deposits, and there will be greater insurance required on deposits. Just 4 years after that change, the lessons of 2008 will have to be relearned.
    - DubiousPusher 4y ago
      > There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration Can't they just up the capitalization requirements and get the same effect with far less red tape and billable hours for consultants and lawyers?
      - danans 4y ago
        IANA-Economist, but I believe the reason that capitalization requirements aren't sufficient is because of the "Last Taxi Problem", described in this article: https://www.clevelandfed.org/publications/economic-commentary/2020/ec-202005-evolution-bank-capital-requirements https://www.clevelandfed.org/publications/economic-commentar...

danans 4y ago

> If the savings and loan of Bismarck North Dakota fails, is the government bailing out the car lot owner and the wheat farmer and the home builder? Yes, the depositors would get bailed out, but the bank itself would be sold for parts. That might constrain the way that retail deposits are allowed to be managed. A start would be undoing the Trump administration's rollback of Dodd-Frank stress testing requirements for smaller banks [1]. It will probably also mean the FDIC will require more insurance on deposits. This will all hurt profitability of banks, and reduce risk for depositors. 1. https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rolling-back-some-dodd-frank-regulations.html https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...

DubiousPusher 4y ago
> Yes, the depositors would get bailed out, Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here.
- danans 4y ago
  > Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here. Yes, the special situation will likely become the new normal. There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration (with the help of many banking-industry-aligned Democrats) eliminated in 2018 for banks with < $250M in deposits, and there will be greater insurance required on deposits. Just 4 years after that change, the lessons of 2008 will have to be relearned.
  - DubiousPusher 4y ago
    > There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration Can't they just up the capitalization requirements and get the same effect with far less red tape and billable hours for consultants and lawyers?
    - danans 4y ago
      IANA-Economist, but I believe the reason that capitalization requirements aren't sufficient is because of the "Last Taxi Problem", described in this article: https://www.clevelandfed.org/publications/economic-commentary/2020/ec-202005-evolution-bank-capital-requirements https://www.clevelandfed.org/publications/economic-commentar...