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Last years bank collapse has demonstrated that FDIC coverage is infinite so long as you have the right connections. Also FDIC limit is theoretically a lifetime
by sidewndr46 3y ago
Last years bank collapse has demonstrated that FDIC coverage is infinite so long as you have the right connections.
Also FDIC limit is theoretically a lifetime limit per individual. Again, no actual limit so long as you know the right people.
Also worth pointing out that when financial institution failure hits people personally regime changes follows quickly. It'd be at the ballot box in the US, but make no mistake it'd come swiftly. As a result, politicians will do whatever it takes to prevent that from happening.
- JumpCrisscross 3y ago> FDIC coverage is infinite so long as you have the right connections Which depositors were screwed for not having the right connections? > FDIC limit is theoretically a lifetime limit per individual No. It’s not even a limit at the same institution, just per ownership category.
- caseysoftware 3y agoThe Big 5 banks have unlimited FDIC coverage because they're "too big to fail" and they scoop up the remains after the FDIC swoops in. Everyone else has the $250k per depositor. That is why the CRE loans are such a huge problem. Their debt is owed to regional banks, not the big ones. That said, the FDIC ignored their playbook and rules to try to calm things down last March. A few more banks went down but not the numbers people expected. That means we're in uncharted territory.. will the FDIC follow their own rules next time or do whatever they want? We don't know.
- JumpCrisscross 3y ago> Big 5 banks have unlimited FDIC coverage because they're "too big to fail" Less than one year! We had three banks fail—the second, third and fourth largest in our nation’s history—less than one year ago [1]! None were TBTF, let alone big five. Every deposit was covered. I get that the headline reads hysterically to a lay reader, but less than one year! [1] https://en.m.wikipedia.org/wiki/List_of_largest_bank_failures_in_the_United_States https://en.m.wikipedia.org/wiki/List_of_largest_bank_failure...
- Ocha 3y agoThey were largest failures not largest banks failing.
- jcranmer 3y agoGoing by https://www.federalreserve.gov/releases/lbr/current/ https://www.federalreserve.gov/releases/lbr/current/ and JumpCrisscross's link, the banks that failed would have been around ~16th largest US bank at the time of failure. I don't know how large Washington Mutual was at the time failure compared to other banks, but just doing straightforward inflation adjustment would put it at #10, and I suspect it's closer to #5 or #6.
- JumpCrisscross 3y ago> were largest failures not largest banks failing Correct. The comment I responded to claimed unlimited coverage was limited to the Big 5. We're less than a year from non-TBTF (we let them fail for god's sake) non-big-five banks (a) failing and (b) receiving unlimited depositor coverage.
- caseysoftware 3y agoOn paper, yes. Which is why I also said: > That said, the FDIC ignored their playbook and rules to try to calm things down last March. There's the SOP and there's what they did, there was no relation between the two which means we have no clue what they might do next time.
- doktrin 3y ago> Last years bank collapse has demonstrated that FDIC coverage is infinite so long as you have the right connections. The intention behind that intervention was clearly to stave off a sector wide run. What held true then and there is by no means guaranteed or even likely to hold true in the event of an actual panic.
- sidewndr46 3y agoAbsolutely agree. If you're going to deposit more than $250,000 make sure you have friends in the right places!
- hn_throwaway_99 3y ago> Also FDIC limit is theoretically a lifetime limit per individual. As far as I know that is not true. Why do you say that? FDIC limits are applied per bank, per individual, per account type, but there is no individual lifetime limit, and a common "cash management" account technique is to distribute your money to multiple banks so you can take advantage of each bank's limit.
- sidewndr46 3y agolooks like the rules were changed sometime in 2020 based off this leaflet: https://www.fdic.gov/resources/deposit-insurance/brochures/documents/your-insured-deposits-english.pdf https://www.fdic.gov/resources/deposit-insurance/brochures/d... I don't know what section of the Federal Register to consult to see if that is actually backed up by something enforceable
- JumpCrisscross 3y ago> the rules were changed sometime in 2020 What rule are you referring to? FDIC coverage has never had a lifetime limit. That would mean someone who gets an FDIC payout at one bank should rush to pull their deposits at others.
- pgwhalen 3y agoWhat are you referring to in this document? The only reference to "lifetime" is for revocable trust accounts, which obviously is not the kind of FDIC insurance most people are concerned about.
- Workaccount2 3y agoFDIC went beyond the $250k limit for depositors last year for SVB collapse.
- hn_throwaway_99 3y agoI know that. I was replying to the statement that "Also FDIC limit is theoretically a lifetime limit per individual" which, AFAIK, has never been true.
- psychlops 3y agoRegime changes do not happen at a ballot box.
- dilyevsky 3y agoYou should stop spreading fud - fdic limit is per account name per bank, not lifetime per person. So anyone can put their money into cash sweep that balances it across many banks to stay under 250k limit