This means that, if for instance BofA or JP Morgan Chase fails (that'd never happen, right?) that the liabilities alone of these banks are already 20x to 40x bigger than the entire FDIC fund.
Please tell me you see the problem there.
Note: If BofA or JP Morgan Chase went bankrupt, it wouldn't necessarily mean that they have zero assets. More likely they'd be able to pay 99 cents on the dollar and the FDIC would pay the last cent.
How long would that take take and what about the overheads of winding up a bank? Also, what about the ranking of different kinds of creditors - depositors would only be kind of creditor if a bank was wound up?
A subsequent $700b was approved and executed, and later on over $7t where commmited (but not all used) for bailouts.
That easily puts the bailouts that banks needed in order not to go under at $2-3t. That's nearly 40-60% of depositor liabilities.
If the bailouts don't happen if JP or BofA go under (for whatever reason), then I don't think the 99c to the dollar theory holds up.
They wouldn't need any funds at all. Whenever they needed money, they'd just ask the Fed.
So, what's the $50b for, really? Or maybe, "full faith and credit" doesn't really mean what you think it means, maybe it means: "full faith and credit... maybe, in the meantime use this $50b fund while we make up our mind"
No, you are being dramatic. Big banks don't fail when they have no assets. They just fail when they become insolvent. They will still likely have all of their deposits to meet the capital reserve requirements. It's when they get caught with illiquid assets that they fail. Look at the 2008 financial crisis and the banks that failed. There was nobody that got short changed that had a regular bank account.
Note the issues the parent mentioned were with 4k+btc transfers
FDIC would not have saved them in USD