Hacker News Reader

Comment by mustache_kimono | Hacker News Reader

Let me get this clear: Is Ackman arguing that there was some sort of implied guarantee, beyond the $250K insurance limit, that the federal government would never let anyone lose money if held in an account at a federally insured bank?

Because WTF. This is precisely moral hazard. The rich can't lose money... in Silicon Valley of all places.

View on HN

Generally, the FDIC will go over $250k if the bank has the assets for it - the guarantee is $250k, but you could be made mostly whole. People online in the banking sphere are suggesting that SVB accounts may be getting a 20-30% haircut (except those at $250k or under, which are not going to lose anything).

Bill Ackman wants them to insure every dollar held at SVB, but not necessarily make a rule to always do this. He only wants his own bank accounts insured, not other peoples'.

Edit: Clarifying - the FDIC doesn't pay anyone to get to a balance over $250k, but they are the ones who administer the bank when it is in bankruptcy, and they use the bank's assets to cover depositors' interests first. In some bank failures, the FDIC ends up spending almost nothing on the insurance because the assets end up covering the accounts completely.

The FDIC doesn't go above the $250k in that case--the assets cover it. I don't think the FDIC has ever paid above and beyond the insured amount to make people whole

A lot of times their takeovers end up with people being made whole, but because they transfer the assets and deposits into another, healthy bank, and the FDIC makes up the losses in the assets, but those losses are going to be less than if they had just paid all depositors their $250k

I think sometimes historically FDIC has misjudged the banks asset values and payed out too big an advance for uninsured funds (and then hence had to absorbe the loss themselves upon liquidation)

They typically (at least where there's been documentation of the deal) where they limit their losses--one instance they sold the bank and guaranteed 20% of the assets. No way for them to misjudge that, they know the maximum they're going to pay out there even if they become 100% worthless

Reply on news.ycombinator.com