> What would you estimate is the total value of customer deposits that banks have loss in failure over the last say 30yrs?
Well of course if we consider only those where loss actually happened and not those where the losses have been mutualized by bail-outs, it may not be gigantic. But, I don't know, in Cyprus hair cuts made $8 bn of customers deposits vanish.
That's just one I know from the top of my head without needing to google.
Would you be willing to make a honest try to compare quantitatively the percentage of deposits lost in regulated western banks vs money lost in failed crypto exchanges, stablecoins etc?
I think the difference must be many orders of magnitude to the benefit of regulated banks.
Percentage wise I would bet crypto is way riskier.
In gross terms, crypto is tiny compared to the dollar/euro banking system, so it's likely to be a much smaller number.
Interestingly, for those who use crypto as-designed, the percentage lost to bank runs is almost nil since you 'hold your own coins'. It's people who leave their money on crypto exchanges that lose their coins.
> It's people who leave their money on crypto exchanges that lose their coins.
People who hold their own coins lose them as well. It was estimated that 3.7 million bitcoin have been already lost irreversibly [1]. That's a staggering number. It's roughly 20% of the entire supply.
They equate “lost” with “not moved in 5 years”. That’s a strangely short cut off — I would use 10 years instead. It’s completely possible for coins to sit around for 5 years in cold storage addresses without being touched.
It's funny because just this week I moved some BTC from a wallet I hadn't touched since 2013. And I used it to pay for something pretty mundane. In retrospective, the idea of someone whipping their "10 year old wallet" just to pay for something trivial is a bit amusing to me.
I think you are selective here. There are lots of coins that have lost value permanently (FTT, luna etc), I also remember reading that there are lots of coins whose network has simply shut down due to lack of interest (no source here, though)
there was also a very uncommon event in '01, '08, '22..
.. at some point, we're gonna have to step back and take a look at how we're doing business. Something about our whole way of organizing society is busted.
Aside from the crypto scandals, the insider dealing scandals, the money laundering scandals, the price and index fixing scandals, and the corruption scandals, there have been 562 bank failures since 2001.
Which is probably well under 0.1% of total companies that failed over the same period.
The thing is failed banks don’t mean depositors lose all their money. The point of banking regulation is fail fast so banks are taken out when they still have 98% of their depositors money not 8%. People with under 250k are made whole and people above that have already been compensated for their risk by higher interest rates.
It doesn’t always work perfectly, but in many cases a failed bank just means people come in on Monday and there is a new sign on the building with little else changed.
Appending scandal to an event isn’t having the persuasive effect you’re looking for. Finance is also the industry which helps us collectively coordinate our resources, grow our wealth for retirement, and facilitate risk taking. Every industry has issues.
I have personally been bailed out by a government when the bank I had a savings account in failed, and its countrys insurance scheme refused to pay. I have had fraudulent charges made to my bank accounts.
On the other hand, the keys to my ethereum remain safe on my hardware wallet, and none of my ethereum has ever moved without me telling it to. Perhaps my experience is atypical, but I am surely not alone.
Sure, and I didn't answer the question. I think it's hard to answer the question in a fair way. Banks and financial instututions fail in various ways from small to big more than most people think. On the other hand, they are 'too big to fail' so their mistakes get fixed by governments out of the public purse.
These options are not currently available to cryptocurrencies, but that's a social choice.
I tend to think that the scamming aspect of cryptocurrencies is massively overstated. There are lots of ways to be taken in and scammed, but that's true in the fiat world too. A small amount of care goes a long way in both worlds.
But you seriously believe that banks are generally better at completely losing deposits than keeping them? It’s just hard to see any evidence-based person believing that.
And how much money was lost in those failures by depositors?
And don't fall back on 'they were bailed out'. They were bailed out by other banks buying their assets + liabilities, and by the insurance payments they were making. They weren't getting a blank check from the treasury. That's the system working.
Who bailed out the crypto losses? Some of the losers got made whole, but many, many, many are realized losses.
> And don't fall back on 'they were bailed out'. They were bailed out by other banks buying their assets + liabilities, and by the insurance payments they were making.
Is that true? I'm not sure it is. The U.S. government gave hundreds of billions of dollars direct to banks and other institutions. The total actual cost has been estimated to be around $500 billion, despite claims that the loaned money was all paid back.
Let me correct that for you. "The total actual cost has been estimated to be around $500 billion, though to be frank the loaned money was all paid back."
That quote appears nowhere in the linked MIT Sloan article or the paper it summarizes, so please don't post such misleading quotes.
As I already mentioned and from the paper's abstract:
> Those conclusions stand in sharp contrast to popular accounts that claim there was no cost because the money was repaid, and with claims of costs in the multiple trillions of dollars.
So to be clear, the paper claims there was still a cost of $500 billion even though money was paid back.
FDIC can insure up to $100k (before 2008) and up to $250k (post-2008), so that's at most one person can get back, the rest puffs and it's gone.
What crypto losses you're talking about? The ones from centralized custody operators that hold your money in arbitrary way rendering your balance on web page in crypto currency or something else?
> FDIC can insure up to $100k (before 2008) and up to $250k (post-2008), so that's at most one person can get back
This is wrong for two reasons:
(1) The insurance limit applies per owner per ownership class; its possible to have accounts in more than one ownership class, and thus more than $250k insured.
(2) Recovery of the insured amount is guaranteed by the full faith and credit of the US government. Recovery of additional amounts is possible, and FDIC will make an effort to make it happen, but that's no guarantee.
No, it is the minimum , maximum, and only insurance the FDIC provides. Banks can and do get private insurance beyond that.
And stop acting like any uninsured money evaporates in a bank failure.
Actually probably just stop talking about banks. This whole thread is an embarrassment of “smart people with strong opinions about things they have zero knowledge about”.
We had foreign banks who advertised that as a strength and sent their profits to their countries. But when there was a crisis they said we are just a local bank with the same brand as a US bank and won't give the customers their savings back.
In practice since 2008 even if the theory is that it’s up to 250k in practice banks get acquired from the FDIC basically on the unspoken condition that all deposits are maintained at 100 cents on the dollar
Its not “unspoken”, its the overt goal to find a bank to take over that will provide that.
But SVB is a much bigger bank with a much larger share of uninsured deposits than a typical bank failure. If the problem extends beyond liquidity and really is an insufficiency of assets by any significant share, its going to be hard for a no-loss takeover to be facilitated.
If I recall correctly, Cyprus “doesn’t count” because those depositors were making something like 9% interest, and therefore they were morally closer to investors. I don’t have a citation at hand...
There was also the Icelandic bank collapse, which was multiple banks totalling tens of billions of euros. I personally lost a large chunk of savings in that, and was eventually bailed out by my own government (i.e. my own tax money).
What would you estimate is the total value of customer deposits that banks have loss in failure over the last say 30yrs?