I also don't blame them for whining and complaining, likely anyone would do the same. The Fed sometimes has to make tough decisions, complying with everything that VCs want just reduces any faith or respect markets have for the Fed and its officers.
I also don't blame them for whining and complaining, likely anyone would do the same. The Fed sometimes has to make tough decisions, complying with everything that VCs want just reduces any faith or respect markets have for the Fed and its officers.
Of course we all want that, the issue is that there are long-established, clearly-defined rules for how much of your account is protected that somehow don’t apply to the rich.
For you or I it’s $250,000. Need more to be whole? Too bad, suck it up, that’s the law. But VC accounts? 100% recovery sir, sorry for the trouble!
>I also don't blame them for whining and complaining, likely anyone would do the same.
Except until last week most of these guys were crowing about PERSONAL RESPONSIBILITY and living with your choices and how handouts and bailouts were evil in response to workers and consumers asking for anything
Curiously though, when it became about their money, suddenly it’s GOVERNMENT HELP
Most bank failures result in all depositors being made whole - even over the limit. Normally by regulators “hinting” that a larger bank should acquire the failing banks assets whole.
FDIC exists to create faith in the banking system - no to just enforce a rule book on how deposit insurance is structured. The goal is for FDIC to never have to pay out in the first place - FDIC’s existence prevents the bank run from starting.
The obvious conclusion to the 250k limit (splitting deposits between banks) doesn’t really do anything to actually reduce risk in the banking system, or risk to FDIC. Splitting deposits like this is artificial behaviour that doesn’t have any real benefits to overall stability of the economy.
Because you're engaging in the classic Hacker News behavior of a narrow technical point that misses the larger context.
People aren't upset about the mechanics of the FDIC. People are upset that time after time the rich make blunder after blunder after blunder and time after time are protected from their own idiocy and hubris in circumstances where everyone else would be left to rot. The same people who, when the shoe is on the other foot, gleefully lecture everyone else about choice and consequences and patronizingly tell them to learn about better personal finance habits.
You're describing the biology of an individual tree and missing the forest. You've filled this discussion with many comments all missing the bigger picture of what's going on and why people are angry about this. You can't analyze events in a vacuum.
I actually think this has created a precedent that will protect deposits of over $250k at small banks. Which is not the domain of poor people, but also not necessarily that of billionaires. So this whole fiasco has created protections that more-or-less ordinary people may well benefit from.
Plus, although $250k is a lot for an individual, it isn't necessarily a ton for a business. For example, I once encountered a small software company of about four people, funded by "friends and family" investors (mostly immigrants), that had about $500k in the bank. The employees were solidly middle-class, and the founder was maybe on par with your typical dentist.
So I don't view this as only a bailout for billionaires, because I think bank failures can affect anyone with a little money.
However, I will grant you -- or volunteer -- the following comparison: Compare this rescue, to what hasn't been done for the residents of East Palestine. That situation is a little different, because the railroad can surely pay for it, so there's no need to consider passing any liability through, say (by analogy) to the railroad industry as a whole. If the executive and judicial branches had been as swift to act in that case as the FDIC, Fed, and Treasury have been in this case, then the people of East Palestine would have been evacuated immediately to comfortable digs, their houses bought for their pre-accident market value, and Norfolk Southern sued to pay for it all.
So while I think the right thing was done in this case, and think it will even benefit fairly-ordinary members of the upper-middle-class, I will grant you that the little guys too often do get steamrolled.
1000 businesses, 10 (same size) banks Scenario A: each bank has 100 depositors, each storing 100% of their deposit with the bank Scenario B: each bank has 1000 depositors, each storing 10% of their deposit with the bank
In both scenarios the total amount deposited at each bank is the same. The risk to FDIC if an individual bank fails is actually higher in scenario B. But the deposit insurance limit rules push us towards scenario B.