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Comment by tialaramex | Hacker News Reader

FDIC means you get paid immediately regardless, but the bank will almost invariably turn out to be good for the rest, just not quickly.

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No, FDIC means you get paid up to $250,000 per insured account immediately Any amount over that you are not guaranteed to be able to withdraw. These people are a long way from regardless

> No, FDIC means you get paid up to $250,000 per insured account immediately Any amount over that you are not guaranteed to be able to withdraw.

The first half is what FDIC insurance means. The FDIC helps distressed banks in a variety of ways, including insuring deposits under $250K, but typically all depositors are made mostly whole again.

> but typically all depositors are made mostly whole again

Typically, but no guarantee. And on what time frame, nobody knows.

Typically the FDIC finds another institution to buy the distressed bank, and backstops losses on bad assets. They were not able to do that in this case

I suspect many depositors will be taking losses in this failure

IndyMac depositors got 50 cents on the dollar above the insured amount in the 2008 collapse.

https://www.ocregister.com/2009/03/20/depositor-losses-final...

It looks like since 1/1/2014 (convenient stopping point for my scrape), FDIC takeovers resulted in an average of 76% of what's owed paid out (range 0%-98%). My guess is the <50% payouts were mostly fraud rather than a situation like this where it's a more traditional liquidity event, so I'd suspect it'll be above average, probably in the 80-90% range.

That's disappointingly low. 0% is what you'd expect from an entirely unregulated "bank" which failed, so regulators were completely ineffective. Does the US just not bother actually having and enforcing capital requirements on banks?

That’s a bit of a grim take. There’s been multiple instances of otherwise well regulated banks being blind sided by deliberate concealed fraud by its employees.

https://en.m.wikipedia.org/wiki/Barings_Bank

Leeson is an example of a bank completely failing to use controls whose purpose is to prevent exactly what happened. The bank should have another employee who is in effect marking Leeson's homework, and instead he was allowed to mark his own, so when he was down a million dollars he could say he was up a million dollars, and keep his job. And of course it's quickly not just one million. This isn't hindsight, these were normal controls, but Barings just didn't bother.

The tragic part of this story is that none of those who should have been responsible for implementing such controls faced any kind of legal action.

Sure, the amount above $250k wasn't insured, so, you don't get that immediately - my core point was that the rest isn't gone and in many cases you'll get all or almost all of it back, that just won't happen soon.

In fact, to the extent ordinary bank failures don't result in paying back all or almost all of the sum owed, the regulator has been far too slow to step in and more aggressive regulation is needed.

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