Classic “should” vs. “is” discussion. GP was talking about our existing financial framework, you are talking about a potential ideal framework.

It's wrong still though. Within our existing financial frameworks, the US government clearly wants putting your money in a major US bank to be essentially risk-free.

If anything, it's the people on the other side of the discussion who generally think depositing money into banks should be risky because they argue that the government ought to not bail out depositors.

But also theory vs practice. In theory a depositor's money is at risk, but at least since the 1930s, no depositor has ever lost money at a US bank. The government always makes depositors whole, despite the supposed insurance limits.

Clearly based on this weekend, our existing financial framework is that depositors are entirely protected, provided the bank is important enough to some important demographic.

This should be spelled out in law rather than relying on the existing provision being used ad-hoc, though.

It's not about the demographic. It's about the consequences to the rest of the banking system. That logic of protecting the system from systemic risk has not changed since the FDIC was founded.

Depositors are effectively bondholders. Bondholders get paid before shareholders.

This is more philosophy than anything. The FDIC, an instituted paid for by taxes, was introduced because farmers lost everything in previous bank failures. Insuring deposits but not shares is entirely a choice made by society, not any inherent property of cash, despite some people wanting it to be so.

In my opinion it's really rather arbitrary at a point. If an individual or corporation has a lot of money that they need to store, they need to consider risk and return regardless. Deposits have FDIC reducing risk, but don't earn much interest. There are government bonds which a different risk and earning profile, and stocks with a different risk profile again.

I feel it's rather narrow to focus only on deposits when in a practical sense it's pretty unlikely that anyone with any meaningful amount of money will keep it all in deposits. Similarly I also have sympathy for small share holders who lost money as part of their pension funds or otherwise. Not sure why hacker news commenters appear so gleeful about these people losing. It's not like bank failures are a "normal" occurrence in any sense.

There are very good reasons we insure deposits and not shares.

1. (Main reason) We insure deposits is to keep bank runs from happening. That's why it was done here.

2. Insuring stocks costs more money, and creates far more moral hazard.

3. Most people/companies have far more diversified stock portfolios than deposits.

Being a durable store of value is generally part of the definition of cash along with liquidity and fungibility. Governments put so much effort into making banking deposits function as cash because the modern banking system would break down if people thought they were better served by having a hidden shoebox full of cash. I don't think anyone here is gleeful about a pension fund losing its money but there is a meaningful difference in terms of which parties should receive federal assistance.

> The FDIC, an instituted paid for by taxes

FDIC is not funded by taxes.

https://www.fdic.gov/about/what-we-do/

“The FDIC receives no Congressional appropriations - it is funded by premiums that banks and savings associations pay for deposit insurance coverage.“

And you shouldn't get any interest on holding cash alone

To emphasize this point. Most of the deposits potentially lost at SVB were in checking accounts to cover day to day expenses. It is hard to imagine why we would discourage companies from using banks to hold cash over a relatively short term.

Should deposits have an associated risk, so that companies prefer to pay their employees in cash and require cash paper bills to settle accounts? If physical cash were required, our economy would be much less efficient.