Banks don’t claim otherwise for years while providing misleading non-audit “audits”, and they have the FDIC to fix things for anyone under $250k if they collapse.

Tether in all probability is a scam. My comment was in response to a very specific claim about what it means for a security to be backed.

Something backed by commercial paper is by definition backed.

The government via FDIC.

FDIC is insurance, it's not a backing asset. And it's limited to 250k USD.

And without it you get occasional massive runs on banks since they don't have actual full backing. Moreover the government will bail banks out if needed providing another but non-guaranteed layer of protection.

Maybe a better way to say it would have been that banks are safer because they're backed by the government including FDIC, bailouts, regulations, oversight, etc.

> And without it you get occasional massive runs on banks

FDIC doesn't prevent runs on banks. It only pays out after a bank is declared insolvent and there's nobody willing to buy the bank.

Banks are regulated for good reasons which make them safer. But at the end of the day banks are in the business of transmuting unsafe long term debt into safe demand deposits.

It’s substantially better than nothing.