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Comment by checkcircuits | Hacker News Reader

The better question of course is who pays for this? They're quiet about it because it's not the banks. The banks paying it is only a technicality. This additional premium they will inevitably have to pay will come from depositors. So, effectively, people who trusted their money with banks are being punished for putting money in banks that abandoned their fiduciary duty to their customers.

Unless the banks themselves pay it and something is in place to prevent these costs being past down to their depositors this should be a non-starter. It is TARP by any other name.

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> banks paying it is only a technicality

FDIC fees are levied on banks. There are a lot of banks, some which compete on deposit rates. (The majors generally do not, but you don’t put your money in a Citibank account to grow.)

It's just insurance for your own account though. You pay to insure your car and you pay to insure your bank account.

As long as bank regulations are reasonably strict that this happens as infrequently as it does, ultimately having depositors foot the bill doesn't seem problematic.

It's more appropriate than taxpayers generally, and it can't be the bank owners because the whole point is they've already been wiped out.

The problem is they aren't wiped out enough. Bankers who instigated the GFC got jobs elsewhere. One of them was even the CEO of SVB!

Breach of fiduciary duty in any other context is essentially a death sentence for a career in finance. Clearly being wiped out isn't enough. The complexity in the matter is that depositors reasonably expect to be able to get all of their money out at any time. As they should. It's their money. At the command of the fed their reserve rates were dropped to zero essentially making the cash value of an account a meaningless number in a computer.

Given this risk, the bank should be the sole party responsible for paying such insurance for it's depositors. It's a cost of doing business, and importantly taking a risk and fiduciary responsibility over a client. We demand doctors insure themselves because they can destroy a patients life. A bank should be the same. To have the depositor (or patient) front the cash in any form should be made illegal. Hence my demand to insure the funds are secured only through the bank owners themselves. Ideally, the executive board carries enough insurance to make all depositors whole in the event of a bank collapse. This should be uncontroversial.

> The problem is they aren't wiped out enough.

Corporations (and banks) rest on the bedrock principle of limited liability. To go beyond that is a pretty radical suggestion. That means if grandma buys shares in a bank as part of her retirement portfolio, then the worst case isn't that the shares go to $0, but that she owes money, without any limit she can know beforehand. I don't think that's a good idea.

> Hence my demand to insure the funds are secured only through the bank owners themselves.

I'm not sure there are any insurance companies who will insure an entire bank, and certainly not one of any decent size. That's the entire reason it's pooled insurance provided by the government.

And in any case, if it became that much more expensive to start a bank because you had to pay for all this insurance up-front, banking just becomes that much more expensive for consumers because owners still want to make the same amount of money in the end. At the end of the day, it's still going to cost consumers the same.

nm, I was wrong, dragonwriter has the right of it

> Insuring unlimited amounts based on the whim of the fed while only charging insurance on the first 250k

The FDIC doesn’t charge insurance on only the amount of deposits covered by insurance. Prior to 2010, it did on all deposits, post 2010 under Dodd-Frank it expanded to all liabilities.

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