Absolutely money is fungible and I largely agree. I just don’t think it’s scandalous but to the contrary proof that the system works.
To criticize the recent events is like saying that any insurance required by any business once paid out is tax payer funded.
For example…Airlines are required to have insurance if and when accidents take place. This is industry wide and the requirements are specific and mandated. The costs of this insurance is transferred via higher ticket prices to the consumer who is also likely a taxpayer. When a plane crashes and the insurance pays the victims (also taxpayers) no one calls it a government bailout.
The FDIC exists to provide security and trust amongst all depositors for amounts up to $250k. They indirectly pay for this protection and hope to never need it. Like the aforementioned airline example it is there for the protection of all but when drawn upon those funds are coming from people who benefited from the security of its existence in the first place not the government.
The “bail out” is industry financed in money that has been collected and set aside to ensure the industry can exist. Otherwise without this safety net only the largest of banks could exist.
Once again I agree! Taxpayers and consumers are however often one and the same. In 2008 the banking and auto industries received direct government bailouts. In these recent instances depositors benefited from having paid into an insurance program that funds itself. Apples and oranges.
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Agreed. But when a government entity, FDIC, repays deposits above the stated insured amounts using those insurance funds it falls into a grayer area IMO.
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I think that is very fair. If you read the FDIC mandate it extends well beyond the $250k protection. I am sure you have seen but likely didn’t notice the signs that are ubiquitous and required to be visible at all banks.
The mandate includes acting to protect the security and confidence of the industry along with managing the liquidation of distressed banks.
The decision to lift that limit in the case of SVB is well within their mandate but I agree that it is in essence them calling winners in losers. I appreciate why the decision was made but can understand how it might rub some the wrong way. Irony being you rarely hear anyone complain when insurance companies pay above and beyond what’s required because they never do😀
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The FDIC is a quasi-government agency. It is funded by premiums paid by banks but it still is the government.
You have nothing to worry about if you have under $250k in deposits in fewer than 5 qualifying accounts. If your bank closes, you would likely switch to a new bank like First Republic account holders did yesterday or the FDIC would have a check for you within one day. It’s also possible the FDIC could open and operate a bridge bank if no other bank was available in your city or town - they won’t leave a community without a banking option.
Could it be an inconvenience to switch banks? Sure, and we all hope our banks don’t fail but if yours should fail it will all be pretty easy for account holders. Loans are a little more trouble to sort out, but it is very likely your mortgage is held and serviced by another entity, and the mortgage could be in MERS (Mortgage electronic registration service) so MERS would release the mortgage at payoff anyway.
It is more than likely - that’s how the system works. The banks pay the premiums to the FDIC and the FDIC runs like an insurance company with employees, claims, legal and accounting departments. And a LOT more government involvement. When the banks failed in 2008, the FDIC had to get a lot more money from the general budget, so that is what is a little different than other insurance companies, the FDIC has a backup in the US budget.
But that’s how everything works. You buy a stamp to mail a letter and those cents go to fund the post office. You buy a parks pass and it provides funding to the national parks. Those agencies might need a boost from congress and the budget, but the hope is that those using the system (banks, mail, parks) will pay to support them.
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Which conspiracies are you referencing?
Bigfoot exists, the moon landing was staged, 9/11 was an inside job, election machines rigged? Or are you suggesting a global cabal is controlling the world economy through their influence in banking and media? That last one gets a lot of play amongst certain groups.
Seems like you are suggesting you have an inside track on this stuff so please share beyond saying you are in the know.
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As mentioned the concerns over commercial real estate exposure are now starting to play out in real time.
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As we speak, CNBC reports that Western Alliance denies everything FT wrote and is exploring legal action against the publication.