4 ms·

The whole point of the FDIC is that it's not good idea to reward people for participating in a bank run.

salawat 4y ago
...Actually, there is no disincentive built into the FDIC for people to participate in bank runs. In fact, the entire point of the FDIC was to insulate depositors from banks doing stupid things with everyone's money. Now that the Fed has bailed out the creme de la creme, I'd like to see the argument employed when the FDIC hasn't got the liquidity left to backstop every other depositor in subsequent bank failures.
- willcipriano 4y ago
  They don't have to argue anymore, this isn't the era you grew up in, that world is gone. A reporter who has a question about it won't be selected to ask one. Recent example of how fake it all is: https://nypost.com/2023/04/26/biden-cheat-sheet-shows-he-had-advance-knowledge-of-journalists-question/ https://nypost.com/2023/04/26/biden-cheat-sheet-shows-he-had...
  - ahahahahah 4y ago
    Yeah, maybe learn how fake the nypost is. This is typical preparation for a high profile q&a: https://www.cnn.com/2023/04/27/politics/biden-note-card-white-house-press-conference/index.html https://www.cnn.com/2023/04/27/politics/biden-note-card-whit...
    - tjfl 4y ago
      Except for the incoming question being on there, per your link: > While it was notable that a potential question was written on Biden’s card, every White House press office takes scrupulous care to prepare their president for news conferences.
      - ahahahahah 4y ago
        Except for the question on there wasn't the question that was asked. Do you understand how q&a (or for that matter court) prep goes? The question on there was an example question that they expected would be along the lines of what that person would be interested in and how they would phrase it (or what particular things they would try to attack/draw out). The article you just quoted even said that.
    - thunky 4y ago
      CNN isn't exactly the gold standard either.
jonathankoren 4y ago
No. The people that didn't participate in a bank run are the ones that get hurt. The whole point of depository insurance is that people like you and me with less than $250,000 in a single account shouldn't get screwed over with billionaires like Peter Thiel decide to play games with other people's money.
- ChadNauseam 4y ago
  > The whole point of the FDIC is that it's not good idea to reward people for participating in a bank run. > No. The people that didn't participate in a bank run are the ones that get hurt. These are the same, right?
  - jonathankoren 4y ago
    No. Because the people that participated got their money out leaving the people that didn’t participate with nothing in their accounts. This happens because of fractional reserve banking. Think about it. Assume we both have an account with $1 dollar in it, and the bank only has $1 on hand. Now I create a run where I take my dollar out, but you don’t participate. I have my dollar, and now you have nothing because the bank failed. How are we the same?
    - dragontamer 4y ago
      > and the bank only has $1 on hand Well, that's not the truth either. The bank is holding onto 30Y mortgages / 30Y Treasuries that will be worth $2 in the year 2050, but is only worth $1.4 (fair market value) right now. This loan was good 2 years ago (ie: its fair-market value was $2) in the year 2021. But the Fed rate-hikes have caused the loan's value to collapse, and so here we are. You withdraw $1, the bank doesn't want to sell the bonds because it'd lock in the loss. The Fed provides a loan at the full principle of the bond (so the Fed now backstops the missing money). The Fed is now acting as the bank of last resort, providing $2 of true dollars to backstop the $1.4 (fair market value) of the bond, which will truly become $2 by the year 2050. The Fed will exist that long so everything should be kosher, in theory. Or so goes the story one month ago. Why didn't this work? Why is FRC still collapsing despite these loans from the Fed? ---------- Believe it or not, life is a bit more complicated than just "fractional reserve banking". You're missing a huge part of the story if that's all your mind is open to. I'm not claiming to have all the answers, but I think it would behoove you to at least try to understand the current situation with a bit more nuance.
WeylandYutani 4y ago
No the point is to prevent a bank run in the first place.
- justrealist 4y ago
  Are you genuinely confused about the mechanism which accomplishes this?
justapassenger 4y ago
True. That’s why FDIC should fulfill its obligations. But not anything more.
- ummonk 4y ago
  That's just ensuring anyone over the insured limits participates in a bank run on every bank that isn't too big to fail (and the first to do so get rewarded by getting to keep their money).
  - justapassenger 4y ago
    No, that's ensuring that we follow FDIC rules. Change the rules, and be upfront about the cost, not relay on one-off precedences. SV bank bailout was a scam. They said taxpayers won't pay for and it'll be paid by banks. Which means customers. I won't pay for it as a taxpayer, I'll just pay it as a bank customer - lovely.

...Actually, there is no disincentive built into the FDIC for people to participate in bank runs. In fact, the entire point of the FDIC was to insulate depositors from banks doing stupid things with everyone's money. Now that the Fed has bailed out the creme de la creme, I'd like to see the argument employed when the FDIC hasn't got the liquidity left to backstop every other depositor in subsequent bank failures.

willcipriano 4y ago
They don't have to argue anymore, this isn't the era you grew up in, that world is gone. A reporter who has a question about it won't be selected to ask one. Recent example of how fake it all is: https://nypost.com/2023/04/26/biden-cheat-sheet-shows-he-had-advance-knowledge-of-journalists-question/ https://nypost.com/2023/04/26/biden-cheat-sheet-shows-he-had...
- ahahahahah 4y ago
  Yeah, maybe learn how fake the nypost is. This is typical preparation for a high profile q&a: https://www.cnn.com/2023/04/27/politics/biden-note-card-white-house-press-conference/index.html https://www.cnn.com/2023/04/27/politics/biden-note-card-whit...
  - tjfl 4y ago
    Except for the incoming question being on there, per your link: > While it was notable that a potential question was written on Biden’s card, every White House press office takes scrupulous care to prepare their president for news conferences.
    - ahahahahah 4y ago
      Except for the question on there wasn't the question that was asked. Do you understand how q&a (or for that matter court) prep goes? The question on there was an example question that they expected would be along the lines of what that person would be interested in and how they would phrase it (or what particular things they would try to attack/draw out). The article you just quoted even said that.
  - thunky 4y ago
    CNN isn't exactly the gold standard either.

jonathankoren 4y ago

No. The people that didn't participate in a bank run are the ones that get hurt. The whole point of depository insurance is that people like you and me with less than $250,000 in a single account shouldn't get screwed over with billionaires like Peter Thiel decide to play games with other people's money.

ChadNauseam 4y ago
> The whole point of the FDIC is that it's not good idea to reward people for participating in a bank run. > No. The people that didn't participate in a bank run are the ones that get hurt. These are the same, right?
- jonathankoren 4y ago
  No. Because the people that participated got their money out leaving the people that didn’t participate with nothing in their accounts. This happens because of fractional reserve banking. Think about it. Assume we both have an account with $1 dollar in it, and the bank only has $1 on hand. Now I create a run where I take my dollar out, but you don’t participate. I have my dollar, and now you have nothing because the bank failed. How are we the same?
  - dragontamer 4y ago
    > and the bank only has $1 on hand Well, that's not the truth either. The bank is holding onto 30Y mortgages / 30Y Treasuries that will be worth $2 in the year 2050, but is only worth $1.4 (fair market value) right now. This loan was good 2 years ago (ie: its fair-market value was $2) in the year 2021. But the Fed rate-hikes have caused the loan's value to collapse, and so here we are. You withdraw $1, the bank doesn't want to sell the bonds because it'd lock in the loss. The Fed provides a loan at the full principle of the bond (so the Fed now backstops the missing money). The Fed is now acting as the bank of last resort, providing $2 of true dollars to backstop the $1.4 (fair market value) of the bond, which will truly become $2 by the year 2050. The Fed will exist that long so everything should be kosher, in theory. Or so goes the story one month ago. Why didn't this work? Why is FRC still collapsing despite these loans from the Fed? ---------- Believe it or not, life is a bit more complicated than just "fractional reserve banking". You're missing a huge part of the story if that's all your mind is open to. I'm not claiming to have all the answers, but I think it would behoove you to at least try to understand the current situation with a bit more nuance.

WeylandYutani 4y ago

No the point is to prevent a bank run in the first place.

justrealist 4y ago
Are you genuinely confused about the mechanism which accomplishes this?

justapassenger 4y ago

True. That’s why FDIC should fulfill its obligations. But not anything more.

ummonk 4y ago
That's just ensuring anyone over the insured limits participates in a bank run on every bank that isn't too big to fail (and the first to do so get rewarded by getting to keep their money).
- justapassenger 4y ago
  No, that's ensuring that we follow FDIC rules. Change the rules, and be upfront about the cost, not relay on one-off precedences. SV bank bailout was a scam. They said taxpayers won't pay for and it'll be paid by banks. Which means customers. I won't pay for it as a taxpayer, I'll just pay it as a bank customer - lovely.