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A comment on Yellen says government will help SVB depositors but rules out bailout. Parent comment

Re:Yellen says government will help SVB depositors but rules... by ordinaryradical on Sunday March 12, 2023 @12:48PM (#35122480)
Because you don’t make depositors responsible for banks’ mismanagement unless you intend to create a depression.

Are you truly proposing that every time a bank fails we make everyone who kept money there take the hit?

A return to the 1920s, eh?

[ Parent | on HN ]
Re:Yellen says government will help SVB depositors but rules... by ryanwaggoner on Sunday March 12, 2023 @01:05PM (#35122758)
Why do you think the FDIC insurance limit is $250k instead of $250mm, or infinite?
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Re:Yellen says government will help SVB depositors but rules... by ordinaryradical on Sunday March 12, 2023 @01:20PM (#35122981)
I will answer and you can answer this question:

Why is the government involved beyond that limit in this case? Could it be they want to give the average person peace of mind while retaining the flexibility to handle a restructuring however they deem best?

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Re:Yellen says government will help SVB depositors but rules... by freeone3000 on Sunday March 12, 2023 @03:26PM (#35124974)
Because the bank continues to have assets, and those assets will be dispersed to cover depositors.
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Re:Yellen says government will help SVB depositors but rules... by paulclinger on Sunday March 12, 2023 @03:18PM (#35124867)
It's because there is a cost associated with this insurance. It's not a bottomless pit of money, as FDIC pays out using the funds it collects from the participant banks and receives no funding from the government (https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...). I think it should be possible for the bank to get better coverage, but they should be paying much larger premium if they want insurance up to 250mm instead of 250k.

I also think that similar to "FDIC insured" labels in bank branches, FDIC should require posting "13% of deposits are FDIC insured" to help assess risk for those clients that have uninsured funds.

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