If banks fail, who pays ?

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.

10 comments

Oh the problems millionaires have. If you have a few million you and your spouse could spread it out over several local banks and still be FDIC insured. I imagine if someone has 3 million in one account they probably have 3 million in other banks and is that like us losing a $50 bill? Would would all be pissed but it wouldn’t be the end of the world for us. Hearing about good businesses in good standing not being able to make their payroll because of a bank failure is quite scary. I don’t have a problem with their money being protected to be able to pay their bills to continue to operate and pay their employees.
shailynn
a year ago
Shailynn is exactly right. Medium to larger businesses need millions of dollars in their operating and payroll accounts to keep going. This isn’t stupidity, it’s how the country works. By backstopping SVB might’ve prevented runs on other banks. Did Biden save the country? Who knows, but it was definitely worth the risk of having a few old republicans accuse him of being woke to prevent the country from crashing. The same old republicans would’ve complained then, and that time they would’ve been correct.
Hank Moody
a year ago
The general public will end up paying. The balance sheet of the Fed increased by 300 billion dollars last week. The Fed is printing up money and buying government securities from the banks that these banks previously unwisely purchased as investments. With maybe half the banks in the country insolvent, this is just the beginning. All this money printing will lead to more inflation. You really have to look at inflation as a tax. It's not a progressive tax that falls more on the rich. It hurts rich and poor alike. The tax is to pay for government spending done to benefit those with political connections. Right now, people are moving money out of smaller banks into bigger banks because they understand the bigger banks are more likely to get bailed out. They will be "too big to fail". It's the little guy, the little business, the little bank that's gets hurt under the current system.
docsavage
a year ago
To answer your question: “It is the sufferings of the many which pay for the luxuries of the few.” ~ Greta Tintin Eleonora Ernman Thunberg ~ Born: 3rd January 2003 Stockholm, Sweden ~ Occupation: Student, environmental activist Awards: ~ Fritt Ord Award (2019) ~ Rachel Carson Prize (2019) ~ Ambassador of Conscience Award (2019) ~ Right Livelihood Award (2019) ~ International Children's Peace Prize (2019) ~ Time Person of the Year (2019) ~ Gulbenkian Prize for Humanity (2020)
CJKent_band
a year ago
We all pay with lower rates and higher inflation. That’s about to come along to prop this up. As I said before, people talk tough until they figure it out. Inflation has dropped since the summer of ‘22, and now they’ll backstop banks with gov $$ to inflate assets again.
Mate27
a year ago
An increase in any fee/tax govt imposes on any business always goes down to the customer/consumer. What would be reasonable if Yellen and the socialists continue squeeze w/fess/taxes, offer an optional special private (get GOVT THE HELL OUT OF THE WAY) insurance policy to cover YOUR deposits/accounts north of $250 Large. That way those with +250K pay, and not the "unwashed masses" covering the asses of "millionaires". Plus, research good a credit union rather than a commercial bank. The vast majority don't need to use The Bigs for their banking.
mogul1985
a year ago
Generally speaking, it is Republicans who fuck the lower and middle class with their endless distractions, while they give massive bonanzas to the rich, fueling greater economic inequality. U.S. Billionaires Got $1 Trillion Richer During Trump’s Term [view link]
wld4tatas
a year ago
The modern Federal Reserve Bank was established in 1913. Up until then, it simply served as a currency clearing house. The Federal Reserve Act gave the Fed massive powers and liquidity to intervene in the market. The Act was developed at a secret meeting of five of the largest Investment bankers and passed by Congress along party lines, with Democrats supporting and Republicans opposing. Since 1913, the Fed has intervened many times to counteract market forces. I would argue it has caused as much harm as good. For example, keeping rates artificially near zero for 15 years has led to the problems we now face. The Fed often over corrects, both on the upside and downside, causing wild swings in the economy and negating natural market forces.
mark94
a year ago
According to the U.S. Census Bureau, income inequality increased in 2021. Biden was president that year. It's largely a myth that Democrats are on the side of the little guy. Their promotion of the Covid lockdowns benefitted Big Tech, since people were forced to stay home with their computers. It also benefitted big box stores like Walmart and Target, since they were allowed to stay open, and also Amazon, since everyone was having packages delivered. Harmed were small businesses forced to close. Big Pharma also benefitted from the vaccine mandates that forced so many to get the vaccines, because they would supposedly stop disease transmission. They didn't stop disease transmission. The Pfizer trials never even tested for that and there was no evidence for that. Now you have the Democrats, along with neocon Republicans, delivering weapons to the Ukraine to benefit the giant military-industrial complex. The real divide in this country is between the corrupt parasitic elites at the top and everyone else.
docsavage
a year ago
It all traces back to Bill Clinton’s embrace of Wall Street and Hollywood, abandoning the working class. That set all of this in motion. Moving jobs to China. Zero interest rates. High inflation. Trillions in stimulus. Open borders.
mark94
a year ago
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