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A comment on Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC.

Re:Joint Statement by the Department of the Treasury, Federa... by Dem_Boys on Sunday March 12, 2023 @08:28PM (#35128836)
With this news, I'm opening a bank. Here is my business plan:

1. Make risky investments and offer better terms than other banks

2. Watch business flock to me

3. Get filthy rich on yearly bonuses

4. 10 years later my risky investments blow up (Make sure to sell stock before)

5. Get taken over by the FDIC

6. Don't return those years of bonuses

7. Let other banks pay for my wrongdoing with a "special assessment"

8. Walk away as a filthy rich failed bank executive

[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by dpkirchner on Sunday March 12, 2023 @08:31PM (#35128874)
9. Get hired by another bank as CFO (See Lehman Brothers/SVB for a tutorial)

10. Repeat

[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by BCM43 on Sunday March 12, 2023 @08:56PM (#35129070)
Is this any different without steps 5 and 7? I don't understand how the FDIC actions change the incentives here.
[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by paulddraper on Monday March 13, 2023 @01:39AM (#35131550)
Presumably, #2 is only possible with a government guarantee for depositors.
[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by auntienomen on Monday March 13, 2023 @02:21AM (#35131838)
Can't do 8 without those!
[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by rullelito on Monday March 13, 2023 @03:09AM (#35132168)
A lot of people would lose money and the system would have to change.
[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by fidgewidge on Monday March 13, 2023 @05:27AM (#35133192)
Way fewer people hate you at the end, which is a meaningful disincentive otherwise.
[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by Dem_Boys on Monday March 13, 2023 @09:01AM (#35135119)
The FDIC's actions indicate that the insured deposit limit is really unlimited instead of the advertised $250,000.

This takes away a huge risk associated with recklessly handling depositors money because now the FDIC will swoop in and make ALL depositors whole.

[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by IAmGraydon on Sunday March 12, 2023 @09:16PM (#35129308)
This is really the typical arc of a hedge fund far more often than banks.
[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by oldgradstudent on Sunday March 12, 2023 @09:51PM (#35129674)
Not very original. It's been done over and over again during the S&L crisis and later.

The Best Way to Rob a Bank is to Own One.

https://www.brookings.edu/bpea-articles/looting-the-economic...

[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by paulddraper on Sunday March 12, 2023 @09:55PM (#35129737)
Presumably, #2 is only possible with a government guarantee for depositors.
[ Parent | on HN ]