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Better question on that front is how it’s legal. It’s not what congress passed or the FDICs charter / mission statement. So it’s kinda just “we’re doing it, eve

Better question on that front is how it’s legal. It’s not what congress passed or the FDICs charter / mission statement. So it’s kinda just “we’re doing it, even if it’s illegal” Kinda like how they gave everyone a year or more where they could live in a place without paying rent via some BS CDC power that didn’t exist.

dvt 4y ago
The legal loophole is that it's essentially a levy on the (other) banks, not the taxpayer. The comedy, of course, is that "bank customer" and "taxpayer" are more or less the same set of people.
- rafram 4y ago
  Kind of, but I don’t pay any fees for my bank account(s) and I don’t expect to in the future, even with the small insurance rate increase levied by the FDIC to cover making SVB depositors whole. Making loans with my money is profitable enough for my bank that they don’t need to charge fees.
  - adastra22 4y ago
    You pay fees, even if they are hidden (e.g. lower interest rates in savings).
    - swores 4y ago
      That's not paying fees.
      - adastra22 4y ago
        Call it what you will, I care not. It is an opportunity cost you pay in the end.
        swores 4y ago
        By that logic a law requiring banks to hire security experts who can keep their systems safe from hackers is also a tax, do you object to that too?
        dvt 4y ago
        I'm not sure why you're being so disingenuous here. It's painfully obvious there's a difference between costs invoked by best-practices and regular business operations and costs invoked by another bank making bad decisions, going bust, and then the other banks' customers having to pay that difference. Making an argument that we should all eat this cost to avoid contagion, etc. might hold some water (and the Fed was stuck between a rock and a hard place), but let's not pretend it's not a cost we're all eating, on top of it being an inflationary move.
    - mortehu 4y ago
      Many banks these days have zero commission brokerage accounts, in which you can hold T-bills or money market funds. Not a lot of reasons to use a "savings" account.
RC_ITR 4y ago
FDIC has broad authority to issue advance dividends on uninsured deposits, based on their estimate of what they will be able to recover from asset sales. FDIC determined that a 100% advance dividend was appropriate, but merchandised it in a way that allows the receivership bank to continue operating as normal.
dragonwriter 4y ago
> Better question on that front is how it’s legal. Because, when, after allowing FDIC broader discretion to decide how to resolve bank failures so long as at least insured balances were covered from the creation of the FDIC, Congress narrowed that discretion in 1991 by adopting the least-cost rule which normally prohibits FDIC from committing more from the Deposit Insurance Fund than necessary to cover insured accounts, they also permitted the FDIC to choose a higher-cost resolution when the required set of officials certified the existence of a systemic risk. (The system risk provision itself precedes the least-cost rule, but when the least-cost rule was adopted, the procedure for systemic risk waa changed and the system risk privision was made an exception to the least cost rule.)
dehrmann 4y ago
The explanation I heard was congress gave FDIC some vague exceptions to its charter because congress knew these sort of actions are politically toxic, but economically necessary(ish).

dvt 4y ago

The legal loophole is that it's essentially a levy on the (other) banks, not the taxpayer. The comedy, of course, is that "bank customer" and "taxpayer" are more or less the same set of people.

rafram 4y ago
Kind of, but I don’t pay any fees for my bank account(s) and I don’t expect to in the future, even with the small insurance rate increase levied by the FDIC to cover making SVB depositors whole. Making loans with my money is profitable enough for my bank that they don’t need to charge fees.
- adastra22 4y ago
  You pay fees, even if they are hidden (e.g. lower interest rates in savings).
  - swores 4y ago
    That's not paying fees.
    - adastra22 4y ago
      Call it what you will, I care not. It is an opportunity cost you pay in the end.
      - swores 4y ago
        By that logic a law requiring banks to hire security experts who can keep their systems safe from hackers is also a tax, do you object to that too?
        dvt 4y ago
        I'm not sure why you're being so disingenuous here. It's painfully obvious there's a difference between costs invoked by best-practices and regular business operations and costs invoked by another bank making bad decisions, going bust, and then the other banks' customers having to pay that difference. Making an argument that we should all eat this cost to avoid contagion, etc. might hold some water (and the Fed was stuck between a rock and a hard place), but let's not pretend it's not a cost we're all eating, on top of it being an inflationary move.
  - mortehu 4y ago
    Many banks these days have zero commission brokerage accounts, in which you can hold T-bills or money market funds. Not a lot of reasons to use a "savings" account.

RC_ITR 4y ago

FDIC has broad authority to issue advance dividends on uninsured deposits, based on their estimate of what they will be able to recover from asset sales. FDIC determined that a 100% advance dividend was appropriate, but merchandised it in a way that allows the receivership bank to continue operating as normal.

dragonwriter 4y ago

> Better question on that front is how it’s legal. Because, when, after allowing FDIC broader discretion to decide how to resolve bank failures so long as at least insured balances were covered from the creation of the FDIC, Congress narrowed that discretion in 1991 by adopting the least-cost rule which normally prohibits FDIC from committing more from the Deposit Insurance Fund than necessary to cover insured accounts, they also permitted the FDIC to choose a higher-cost resolution when the required set of officials certified the existence of a systemic risk. (The system risk provision itself precedes the least-cost rule, but when the least-cost rule was adopted, the procedure for systemic risk waa changed and the system risk privision was made an exception to the least cost rule.)

dehrmann 4y ago

The explanation I heard was congress gave FDIC some vague exceptions to its charter because congress knew these sort of actions are politically toxic, but economically necessary(ish).