It’s the banks saying “as banks, we know everything is fine. As consumers/depositors/internet commenters, you might think - or even claim - that things are not fine. But you are wrong, things are fine. Oh, you still disagree? Where’s your 1-5 billion dollar bet? Yeah. Didn’t think so.”
The casual tone by which people (including you) were discussing this. If a bank had even week long issues like that people would be frothing at the mouths (and rightly so).
>It's just information for understanding the situation.
Yes, it's the "understanding" part that I don't get (except if it's pure technical curiosity, but from the excuses people make in this thread it doesn't seem so).
They messed up, they are not a worthy exchange, that kind of fiasco is insurmountable -- end of story. I wouldn't try to "understand" a restaurant that served my cochroaches in my pizza, I'd just avoid it and bad mouth it to everybody I know.
> Customer deposits should meet liabilities 1:1. If they don't, somebody is lying.
That’s not how banking works. You hold illiquid assets. Sometimes they move in price. If they move enough in price you’re insolvent. Limiting bank runs is a genuinely hard problem.
> What is the bad behaviour of the depositors? Trusting that their deposits were safe in a bank? This isn’t bad behaviour, the government wants people to think that bank deposits are safe. Safety of bank deposits is really important to the economy.
Yes, it is exactly this bad behavior. The gov has only guaranteed safety up to $250k. Any entity exceeding this limit does so at their own risk. By depositing far above the insured limit, you are allowing that bank to transact with your money. The banks loans it out. So by definition those consumers thay ignored the limits incentivized the bad behavior.
Had this bank started losing customers because they faced insolvency risks, they may have changed their behavior. The market provides a feedback loop.
>> most people entrusted banks to do the right thing
This prevailing sentiment that banks/government/overlords will do the right thing has been mostly proven wrong time and time again. I don't agree with the top-level commenter's tone, but I understand the content.
Putting faith in large business or bureaucracy of any kind is a recipe for disaster.
>Have the FDIC rates actually changed or is this a hypothetical.
It's hypothetical. The FDIC is likely to recover a vast majority of the uninsured deposits through asset sales, people just want to be outraged.
At smaller banks, 60-75% of uninsured deposits are usually recovered by FDIC and those banks went out of business for bad balance sheets, not bank runs due to duration mismatch.
We've gotten so used to assuming every statement is spin on 'you're getting screwed' that people assume it's always the case.
> We recently went through that cycle faster than we thought possible with regards to a bank which responsible people considered very safe. According to the official record, one of the institutions went from being financially healthy one day to insolvent the next. I believe that narrative to be face-saving, but it is what The System currently is messaging as the truth, so let’s accept it for now. If this is the truth, what unfortunate truths might we learn in the near future?
Yeah, this is a good quote, and I find it unbelievable that a bank goes from financially healthy one day to insolvent the next. I also find it far more discomforting than the alternative (that it was financially unhealthy for a while, and many other banks are as well). Is this really the 'official' record?
"People seem to have a really hard time with the idea that, in the SVB debacle, the system worked effectively and pretty much the way it was planned to. It's not even clear what people are upset about."
Does that have anything to do with this article at all? First few lines of this article: Banking is a confidence trick. Financial history is littered with runs, for the straightforward reason that no bank can survive if enough depositors want to be repaid at the same time. The trick, therefore, is to ensure that customers never have cause to whisk away their cash.
This article is about the possibility of the total loss of confidence in the banking industry leading to a run on a system that can't handle it. I understand the context you meant when you said things like "the system works, why is everyone upset", but I find those a pretty poor choice of words regardless with this much fear circulating.
> They are telling you you can have all that money immediately.
I don't think they're even telling you that. And that is absolutely not what we were taught about banks in school. I think that banks do assume that everyone basically knows how banking works, though, so they don't engage in an educational program about it when you open an account.
What banks have told me is that my deposits are safe (in the sense that I won't lose my money) up to $250k. That's true enough. And I also remember reading the paperwork I signed when I've opened accounts where they specifically say that my deposits might not be available at the moment I want to withdraw them, for various reasons.
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