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Comment by dheera | Hacker News Reader

FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC.

>> FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC.

Also, banks have capital leverage ratios they need to abide by. FTX had no concept of leverage ratios or haircutting assets by liquidity.

> Also, banks have capital leverage ratios they need to abide by.

I mean yes, but it's just a band-aid for a shitty system in which they allow banks to lend money they don't have, so they needed some ratio to control the mess they created.

In in ideal system nobody lends money that isn't their own. Period.

In an ideal system they don't lend out demand deposits, but lend out money from cds and other instruments.

also my bank hasn't gone insolvent yet

"Yet" is the operative word. Many banks were insolvent in 2008, or have we so quickly forgotten the lessons from the housing crisis.

OK sure so the FDIC can just insure FTX then.

Other brokerages lend out their spare cash without your consent, too.

It's not really any different other than that law has (rather arbitrarily) decided to protect one and not the other.

Insure what, exactly? Insure peoples imaginary crypto coins? Insure deposits into a brokerage account? Did FTX sweep brokerage accounts into a valid, insurable class? You're missing a ton here, buddy

Proper brokerages will pay you to lend your securities, transparently disclose their programs, and require consent. For example:

- https://www.interactivebrokers.com/en/pricing/stock-yield-en...

- https://www.fidelity.com/trading/fully-paid-lending

Some brokerages lend out spare cash (and pay a transparent interest rate, and are subject to strict reserve requirements) but the majority of assets controlled by a typical brokerage are securities. FTX assets were all subject to their leverage strategies, with no specific reserve.

The fdic is not a law, its a self sufficient insurance company that banks pay premiums to.

That's not how banks work: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

The bank has your consent, and brokerages and exchanges are not banks.

No, they don't have my consent.

I'm forced to use banks because the government won't protect me from criminals if I shove cash under my mattresses.

The banks don't offer an "opt-out" option when you register. Real consent means you offer "yes" and "no" and the other party says yes.

It's effectively forced upon me.

"I'm forced to use banks because the government won't protect me from criminals if I shove cash under my mattresses." Oh please.

The irony of your ill-informed statement is that if you want to put your money in places where it can't be loaned out to others without your consent, where you should really put it is a brokerage - at least, one in the US, where there are regulations ensuring your funds can't be loaned without your consent, and your assets are protected by SIPC insurance.

They do have your consent - thats how banks work and you agree that when you deposit money in one. It seems that you are unhappy about having to consent? But, what I'm confused about is what you are upset - your money in a bank is FDIC insured, so, unless you have account that exceed the limits of that insurance, you have no risk from you bank going insolvent. So, what's the problem?

Just rent a deposit box at the bank and put your cash there. They won’t touch it. Just like having it under your mattress but probably safer from criminals.

A) Banks seem to be getting out of the business of hosting deposit boxes. I’d guess it’s not worth the hassle and liability.

B) I don’t know about all of them, but the ones I’ve used have explicit rules against storing cash.

Would a so-called cbdc work? Get a bank account at the Fed that only gives you overnight rates (i.e. low but still higher than banks!), and only risk is sovereign risk.

Akin to the narrow banks proposals of a few years ago

Given that the Fed refused to grant licenses to those narrow banks, with no real justification, those CBDCs seem unlikely to happen.

Are you dense? Do you know how money works? Do you know capitalization methods modern banking has been using for nearly 2500 years?

Modern banking is not 2500 years old...more like 500 years old.

You'd be surprised. Lots of evidence and some writings on banks in the Babylonian times, with similar concepts dating back well over 2500 years. Obviously much has changed. Oddly, SBF seems to have perpetuated an early form of fraud, "confidence men"

Your deposits in the US banks supposedly insured and guaranteed by the federal government. You have nothing to lose unless the feds are out of funds as well

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