If banks fail, who pays ?
mark94
Arizona
Monday, March 20, 2023 3:38 PM
From the Kobeissi Letter
Uninsured Deposits by Bank:
“1. BNY Mellon, $BK: 97%
2. SVB, $SIVB: 94%
3. State Street, $STT: 91%
4. Signature, $SBNY: 90%
5. Northern Trust, $NTRS: 83%
6. Citigroup, $C: 77%
7. HSBC Holdings, $HSBA: 73%
8. First Republic Bank, $FRC: 68%
9. East West Bancorp, $EWBC: 66%
10. Comerica, $CMA: 63%
There are now a total of $8 trillion in uninsured deposits in the U.S.
Roughly 40% of all deposits are uninsured.”
Right now, the account holder is legally at risk for these amounts over $250,000. Even so, Treasury decided to protect the account holders at SVB.
Now, there is a debate about whether the government should assume the risk of all of this.
Personally, the moral hazard argument sways me. If you remove any penalty for doing stupid shit, people will do a lot more stupid shit. And, as someone who doesn’t keep $250,000 in a bank, I don’t think I should pay for others stupidity.
In most cases, these accounts are businesses and wealthy investors who should understand the FDIC limits. They also had an obligation to determine the financial health of the bank where they were parking their money. That’s how you incentivize banks to invest wisely.
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