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I don't see how any depositor's assets could be more "risky" than another depositor's - it's straight cash in all cases - unless the bank is doing sketchy shit

I don't see how any depositor's assets could be more "risky" than another depositor's - it's straight cash in all cases - unless the bank is doing sketchy shit with their money, like lending it out unsustainably to the point they won't be able to pay their depositors if some of them want their money back... but I guess that's the definition of the fractional reserve banking system, so maybe my real issue is with the fundamental ridiculousness of that. I don't want to sound like that guy in the SVB thread who ended up advocating for Sharia law, and I've got to go to bed, so I'll leave it at that. I would also implore you to consider that closely related (quasi-)government agencies like the Fed, FDIC, SEC and Treasury are all capable of maliciously coordinating with each other in their timing of enforcement actions and agendas. And maybe they're just doing their job of protecting the dollar, but IMO it doesn't make it any less obviously corrupt.

JumpCrisscross 4y ago
> don't see how any depositor's assets could be more "risky" than another depositor's - it's straight cash in all cases One, correlation. A bank with one $1bn hedge fund is riskier than a bank with a billion $1 individuals. This is the part regulators focus on. (One oversight with SVB was not classifying VCs as quasi-financial institutions.) Two, reputation. As we've seen, there is a premium to being able to say you're clean of crypto when e.g. Binance or Tether go under. Three, cost. KYC and AML, for one. (It's why many banks won't open accounts for gambling businesses.) But also how often they use revenue-generating versus free services. If you're constantly wiring in and out your entire balance, you're substantially more costly to your bank than someone who deposits leaves it alone. Finally, core competence. Flagstar/NYCB focus on a niche. They have built their processes to deal with those customers' demands, trained their staff to be familiar with the, and hired people who like working with them (and with whom they like working). They don't want a bunch of crypto deposits any more than they want aerospace manufacturers'. It's a different business.
- chatmasta 4y ago
  I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. In my ideal system, the bank's consideration ends as soon as they receive the money and put it in their vault. In your ideal system, the bank considers the likelihood of the depositor coming back the next day and asking for their money. And you're right, at least in the current reality of fractional reserve banking. But from a fundamental perspective, it just seems morally wrong to me.
  - JumpCrisscross 4y ago
    > the bank's consideration ends as soon as they receive the money and put it in their vault A regional bank is choosing to stick with its area of specialty. There remain banks who specialize in crypto, and differentiate themselves on that basis. > it just seems morally wrong to me Only one component is related to withdrawal probability. The others, like service cost, fraud risk, et cetera, are business decisions. It's odd to say a bank choosing a specialty is wrong. (Or vice versa, that a bank should be forced to serve clients it finds morally repulsive.) That said, you and I see eye to eye when it comes to natural persons: a bare-bones bank account should be entitled to. In the era of cheque-writing, there was a necessary credit component to account opening. That's no longer necessary. (For businesses, it would require dismantling our AML system.)
  - vkou 4y ago
    > I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. A bank's entire business model consists of borrowing money for variable-length terms from depositors, and lending it out at fixed-length terms to borrowers. This question is absolutely the bank's business. In fact, it is the most critical question that a bank needs to be asking itself every single day, if it wants to stay solvent, and actually be able to honor customer withdrawals. SVB, and its shareholders have been wiped out because it didn't have a good answer to that question.
    - chatmasta 4y ago
      Yeah, I get that. But I do wonder, if we were designing the economy from first principles, whether we would not only invent such a ridiculous idea as fractional reserve banking, but if we would also decide it should be the central engine for economic growth. Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something.
      - JumpCrisscross 4y ago
        > the people who dared to think from those first principles are now becoming unbanked Folks doing honest research are fine. Those scaling glorified slot machines are having a tougher time.

JumpCrisscross 4y ago

> don't see how any depositor's assets could be more "risky" than another depositor's - it's straight cash in all cases One, correlation. A bank with one $1bn hedge fund is riskier than a bank with a billion $1 individuals. This is the part regulators focus on. (One oversight with SVB was not classifying VCs as quasi-financial institutions.) Two, reputation. As we've seen, there is a premium to being able to say you're clean of crypto when e.g. Binance or Tether go under. Three, cost. KYC and AML, for one. (It's why many banks won't open accounts for gambling businesses.) But also how often they use revenue-generating versus free services. If you're constantly wiring in and out your entire balance, you're substantially more costly to your bank than someone who deposits leaves it alone. Finally, core competence. Flagstar/NYCB focus on a niche. They have built their processes to deal with those customers' demands, trained their staff to be familiar with the, and hired people who like working with them (and with whom they like working). They don't want a bunch of crypto deposits any more than they want aerospace manufacturers'. It's a different business.

chatmasta 4y ago
I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. In my ideal system, the bank's consideration ends as soon as they receive the money and put it in their vault. In your ideal system, the bank considers the likelihood of the depositor coming back the next day and asking for their money. And you're right, at least in the current reality of fractional reserve banking. But from a fundamental perspective, it just seems morally wrong to me.
- JumpCrisscross 4y ago
  > the bank's consideration ends as soon as they receive the money and put it in their vault A regional bank is choosing to stick with its area of specialty. There remain banks who specialize in crypto, and differentiate themselves on that basis. > it just seems morally wrong to me Only one component is related to withdrawal probability. The others, like service cost, fraud risk, et cetera, are business decisions. It's odd to say a bank choosing a specialty is wrong. (Or vice versa, that a bank should be forced to serve clients it finds morally repulsive.) That said, you and I see eye to eye when it comes to natural persons: a bare-bones bank account should be entitled to. In the era of cheque-writing, there was a necessary credit component to account opening. That's no longer necessary. (For businesses, it would require dismantling our AML system.)
- vkou 4y ago
  > I think where we disagree here is on whether it should be the bank's business how and when their depositors deposit and withdraw their money. A bank's entire business model consists of borrowing money for variable-length terms from depositors, and lending it out at fixed-length terms to borrowers. This question is absolutely the bank's business. In fact, it is the most critical question that a bank needs to be asking itself every single day, if it wants to stay solvent, and actually be able to honor customer withdrawals. SVB, and its shareholders have been wiped out because it didn't have a good answer to that question.
  - chatmasta 4y ago
    Yeah, I get that. But I do wonder, if we were designing the economy from first principles, whether we would not only invent such a ridiculous idea as fractional reserve banking, but if we would also decide it should be the central engine for economic growth. Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something.
    - JumpCrisscross 4y ago
      > the people who dared to think from those first principles are now becoming unbanked Folks doing honest research are fine. Those scaling glorified slot machines are having a tougher time.