> Depositors in banks aren't expected to do due diligence on the financial statements of the bank they're depositing in. Have you read the 10-K filings of your bank in detail?

If you have less than the insured amount you are not expected to do anything.

If you have significantly more than the insured amount you should do your homework and manage your risk. Anyone who was alive during the 2008 crisis should be aware of the problem.

I know a few small business-people. They have more than 250k cash but not in the millions. They definitely spread their cash in several bank accounts. But then, they are not tech people.

It would be Tikkun Olam (https://en.wikipedia.org/wiki/Tikkun_olam) to allow them to fail completely, not to continue having learned no lessons.

You are a student, life is the teacher.

In this case, the students get a failing grade.

the regulations say only $250K are insured per account

smaller depositors should be ensured by the FDIC

you can, and should, have accounts in different banks if you have over a quarter million in US$

> Depositors in banks aren't expected to do due diligence on the financial statements of the bank they're depositing in. Have you read the 10-K filings of your bank in detail?

If you're depositing more than the FDIC insurance limit, you should probably do some due diligence and/or get private insurance for the risk.

Correct. The $250,000 FDIC cap is a favor to banks. They only pay fees to insure up to that amount. And it's bogus. The FDIC should require deposits to be insured, no matter the amount.

The insurance is there to prevent run on retail banks by the general public.

It is expected that you manage your risks if you have significantly more than the insured amount.

I'm not going to pay to insure a millionaire. Insurance is not free.

With the way things are going, don't be surprised if some silicon valley innovator come with insurance product that can be purchased after the fact. With marketing like "Come, Disrupt the Insurance Industry" it might just work out fine

The first sentence is basically what Tan is proposing

Minus the “purchased” part. He just wants it.

Yes I forgot to mention the key part

>The $250,000 FDIC cap is a favor to banks. They only pay fees to insure up to that amount. This is not correct. Banks pay FDIC premiums on ALL liabilities - not just insured ones [0]

>The FDIC should require deposits to be insured, no matter the amount. This exacerbates the moral hazard problem [1]. Basically, if all deposits were insured, then bank executives would have no restraint on risk taking. If you think things are bad now, imagine a situation where bank executives know depositors would always be made whole no matter what they did. An unlimited deposit guarantee is a recipe for disaster. [0] https://www.fdic.gov/resources/deposit-insurance/deposit-ins... [1] https://dailyreckoning.com/fdic-fosters-moral-hazard-among-b...

Depositors are not at risk of being wiped out. The first 250k is insured and it looks like they will get back a lot of the uninsured portion