What about "regular" people's 401k, it took almost 10 years for it to recover. No protection there. Also if you can have a bank account above 250000, you are not a "regular person".
You said "What about all the people who lost what to them was a lot of money in 2008, did the Gov protect them? I do not think so."
My claim is that the bank accounts of regular people in 2008 were in fact protected, since anything under $250K is automatically protected, in exactly the same way proposed here.
Investors certainly lost a lot of money in 2008. And investors in this bank will lose all their money too, since bailing out the bank's investors, or the bank as a business, is not being proposed by anyone.
It's a bit different. Banks are supposed to be a safe place for cash. "Safe" means essentially zero risk: interest checking, CDs, etc. Low interest, low risk. This is very different from an investment account (401k or not) where risk is expected.
If I had >250K at a smaller bank, I'd be concerned.
Truth is that there is no safe place for money. Maybe it is time of everyone to understand that. Everything has some level of risk involved. And here it is time based one.
Do you want everyone taking money out of ATM machines, stuffing it in their mattress? Literal bank runs? This sounds extreme, but that is a possibility if the public genuinely perceives there is "no safe place for money."
Just have to have them take the next step too. That money stuffed in mattress is at risk from even more reasons. The house could burn down, there might be criminals stealing it or simply the police could get hint and do civil forfeiture.
The first $250,000 per person per bank, essentially, is already protected. With investments and real estate living on different balances sheets, any policy change or bailout here isn't for the sake of people who might stuff money in their mattresses. They're already covered.
It's about guaranteeing that the stewards of very large wealth don't have to practice the conservative risk management strategies available to them.
Conservative risk management strategies like "only bank with BofA and JPMorgan"?
Ackman isn't wrong that the practical result of bank runs is that all accounts beyond the FDIC limit will suddenly migrate to one of two or three major "too big to fail" banks.
I'm not sure what the solution to all this is but it sure looks like a good time to buy stock in quasi-monopoly bank companies and short all the rest.
>Conservative risk management strategies like "only bank with BofA and JPMorgan"?
Or: diversify bank relationships, diversify asset classes/types, buy private insurance, etc. Deposit risk is not exactly a novelty.
> Ackman isn't wrong that the practical result of bank runs is that all accounts beyond the FDIC limit will suddenly migrate to one of two or three major "too big to fail" banks.
He might be right that immediate reactionary adjustments will rush these risk-blind deposits into big institutions, but FDIC insurance and bailout-able banks aren't the only ways to keep a liquid portfolio largely secure and money will inevitably spread out more prudently once the dust settles.
He just wants a bailout for SVB depositors because he calculated a bailout into his own risk strategy and is now developing that strategy through its next phase by whipping up the political pressure that could make it happen. It's a game.
A properly-stored crypto cold wallet is a safe place for pretty much any amount of money. Most people here tell me I don't need that because banks are safe and secure and backed by the might of the US government.
> A properly-stored crypto cold wallet is a safe place for pretty much any amount of money.
???
It's a safe place for the units of cryptocurrency identified by it, but those aren't money until it can be exchanged for something. Between you burying that USB key under the old oak tree and you digging it back up post-apocalypse, those units of cryptocurrency will have a very different exchange value. It's no different than tucking currency under a mattress, except that the odds of your 2023 cryptocoin being worthless by the time you pull it out is much higher than that the 20th century's global reserve currency becomes worthless. Although it might go the other way, your wallet contents don't sound like a very safe store of money at all.
I don't know what you consider "long term", but if you asked anyone who stored their wealth in a cold wallet before 2020 they would be at worst, a couple % up right now. The vast majority would likely be up at least 100%.
These completely mindless dunks on crypto on HN are getting out of hand. You can say it's not scalable, or that it doesn't have a future for A, B, C reasons, or any other number of valid complaints. But instead they've devolved to the most degenerate falsehoods that can be disproven with a single look at the long term chart.
Curious about the logic you used to determine a company's balance based on employee pay. Is this just your own number fidgeting or an actual best practice in finance?
It seems weird that a company paying someone less than $5K a month would need $250K in the bank. we had $100K seed check at my startup and I got paid $6K per month as a counter example.
Ok, so they paid you 72K year, plus employer side social security/taxes, benefits, etc. Call it 80K. Does that seem like a lot of money left over for other expenses?
Almost all customers of this bank are Silicon Valley tech companies and startups. Some of them will struggle to make payroll in the coming days.
Do you really think it's sensible to let healthy companies fail and people lose their jobs or keep working without getting paid because other people had to wait far too long to recover their 401k?
> Almost all customers of this bank are Silicon Valley tech companies and startups.
I.e. "high-risk businesses that did not assess the risk of their bank (or banks) properly." That's not a good reason to shift the risk penalty to the taxpayer, IMO.
Bank balance sheets are very complex. Analysing them is not an expertise that most small businesses have or should have.
Banks are heavily regulated. They have to pass stress tests all the time. The regulator is paid for by the taxpayer to stop things like this from happening, but apparently they were asleep at the wheel.
Also, helping depositors out of this mess doesn’t necessarily mean that taxpayers lose a cent.
In this particular case tax payers would not have to cover any losses at all. The actual losses are relatively small and depositors can and should be asked to take a haircut if necessary. The critical issue here is timing. You don't want viable companies to run out of money just because a temporary liquidity issue cannot be resolved quickly enough.
In general, I disagree that it is never sensible for tax payers to act as insurance of last resort provided that the insurance premium in the form of business taxes is adequate. It can be the least worst solution for society as a whole in case of a domino effect. But this is not (yet) what's happening here.
>The critical issue here is timing. You don't want viable companies to run out of money just because a temporary liquidity issue cannot be resolved quickly enough.
The market already has adequate solutions, while these shortcut intervention ideas have moral hazards. Why cant other companies that see the opportunity take the required risk?
There has been a massive inequality exacerbating bull run with record profits but the beneficiaries want to avoid even the slightest downside of that risk-taking. If my understanding is correct, this kind of behavior is trading short term instability for potentially massive long term tail risk.
They can get bridge loans or sell their deposit claims at a discount (in exchange for the liquidity), if they didn’t otherwise have supplemental insurance.
That’s what’s at stake here, the companies would prefer to have all their money, right now. They could have almost all of their money if they are happy to wait, or they could pay, out of their money, to have their money right now.
Don’t fall into the trap of corporate sympathy here, they would not do the same for you.
Yes, I just worry that some of them might not be able to sort this out quickly enough on their own.
Also, the total amount of similarly illiquid government bonds is gigantic after interest rates have shot up so quickly. Let's not make the Lehman mistake again. It's not worth sacrificing the entire economy to ideological sensitivities (on both sides of the political spectrum).
