According to whom? (It’s not true.)
I would maybe believe the argument that the buyer of the bank didn't want to take on the depositors, if it weren't so convenient for the Fed. As it is, I have trouble believing the FDIC didn't pressure the buyer to make that distinction between depositors as part of the sale process.
> FedNow is not a CBDC.
No, but it's the clear first step towards one.
When you bid on a banks assets and liabilities, you get a bunch of spreadsheets. These describe the bank's assets and liabilities, including its depositors. You're allowed to say "not that branch" or "no depositors matching these parameters."
> what makes them fundamentally any different
They're riskier. Silvergate banked FTX. That was a fraud, and now Silvergate is gone. Signature banked less crypto, but when Silvergate began failing Signature started to slide. Flagstar doesn't want that problem. (I imagine there are also AML/KYC concerns. Signature's crown jewel was its high net worth clientele. That gels with NYCB [1].)
Another risky type of depositor are financial institutions. It's not uncommon, in bank takeovers, for deposits from certain types of financial institution (e.g. hedge funds) to be excluded.
> it's the clear first step towards one
This takes imagination. They're separate tracks. FedNow competes, most directly, with Zelle. It's an always-on modernization of Fedwire, a faster ACH. In any case, the zeal for a CBDC has cooled with crypto's fall and the advent of universal deposit insurance.
I don't want to sound like that guy in the SVB thread who ended up advocating for Sharia law, and I've got to go to bed, so I'll leave it at that.
I would also implore you to consider that closely related (quasi-)government agencies like the Fed, FDIC, SEC and Treasury are all capable of maliciously coordinating with each other in their timing of enforcement actions and agendas. And maybe they're just doing their job of protecting the dollar, but IMO it doesn't make it any less obviously corrupt.
One, correlation. A bank with one $1bn hedge fund is riskier than a bank with a billion $1 individuals. This is the part regulators focus on. (One oversight with SVB was not classifying VCs as quasi-financial institutions.)
Two, reputation. As we've seen, there is a premium to being able to say you're clean of crypto when e.g. Binance or Tether go under.
Three, cost. KYC and AML, for one. (It's why many banks won't open accounts for gambling businesses.) But also how often they use revenue-generating versus free services. If you're constantly wiring in and out your entire balance, you're substantially more costly to your bank than someone who deposits leaves it alone.
Finally, core competence. Flagstar/NYCB focus on a niche. They have built their processes to deal with those customers' demands, trained their staff to be familiar with the, and hired people who like working with them (and with whom they like working). They don't want a bunch of crypto deposits any more than they want aerospace manufacturers'. It's a different business.
A regional bank is choosing to stick with its area of specialty. There remain banks who specialize in crypto, and differentiate themselves on that basis.
> it just seems morally wrong to me
Only one component is related to withdrawal probability. The others, like service cost, fraud risk, et cetera, are business decisions. It's odd to say a bank choosing a specialty is wrong. (Or vice versa, that a bank should be forced to serve clients it finds morally repulsive.)
That said, you and I see eye to eye when it comes to natural persons: a bare-bones bank account should be entitled to. In the era of cheque-writing, there was a necessary credit component to account opening. That's no longer necessary. (For businesses, it would require dismantling our AML system.)
A bank's entire business model consists of borrowing money for variable-length terms from depositors, and lending it out at fixed-length terms to borrowers.
This question is absolutely the bank's business. In fact, it is the most critical question that a bank needs to be asking itself every single day, if it wants to stay solvent, and actually be able to honor customer withdrawals.
SVB, and its shareholders have been wiped out because it didn't have a good answer to that question.
Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something.
Folks doing honest research are fine. Those scaling glorified slot machines are having a tougher time.
I think it's quite likely that any society that wouldn't adopt it would be overtaken in economic productivity by a society that did.
> Alas, the people who dared to think from those first principles are now becoming unbanked from, or denigrated as criminals by, the very system they sought to replace. Perhaps they were onto something.
They are generally onto entrusting their money into organizations and investments ran by, or successfully attacked by criminals, which is why crypto money has a disturbingly frequent tendency to go poof.
The moral of the story, here, is that if you have an ideological reason to... Somehow stick it to the man and stay out of the insured banking system, you're going to be in real bad company.
(Also, isn't it kind of weird how quick crypto was to re-invent sub-prime lending, through coin staking, and how quick exchanges are to gamble with and lose customer funds?)
The FDIC isn't a bank. Signature was largely bought, but "Flagstar's bid did not include about $4 billion in deposits related to Signature's digital-asset business." The FDIC is telling depositors they couldn't find a buyer for to find a new bank.
> they pose a threat to the future hegemony of a government-backed digital currency
FedNow is not a CBDC. It's a modern set of payment rails for interbank transfers.