The Banking Crisis (analysis, work, stock, investor)
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1. I don't know if the FDIC deposit insurance cap will be increased or not. IMO it should be $500,000 at least.
2. If I understand your question. Depending upon how the deposit was made either nothing via check or maybe wire transfer fees.
Maybe I should have asked what a bank pays to insure my $250K? I'm sure that it is minimal in dollars. But assuming the cost is passed on to the depositors, I would wonder how much more to go to $500K or beyond?
Maybe I should have asked what a bank pays to insure my $250K? I'm sure that it is minimal in dollars. But assuming the cost is passed on to the depositors, I would wonder how much more to go to $500K or beyond?
I haven't looked at the FDIC chart in a while but I think the range is 1.5 to 40 basis points. 1.5 for a well very capitalized bank and 30-40 for a less than well capitalized bank.
Ergo as the Fed. has backstopped all current, and I think future, deposits into SVB I'd guess FDIC insurance costs on $250K would be $37.50 (250,000 x 0.00015). But again that is a WAG. For all I know there is a set receiver rate that is above 1.5 basis points.
In reality it's much more complex than this. There are credits, bracketed prices and I think the money center banks sometimes pay zero.
ETA - OK I looked it up....I'm fairly sure the fees are still 1.5 - 40 basis points.
It is ridiculous that the big banks bailed the smaller ones out. This adversely impacts their financial position and makes them less financially viable. Also don’t agree with the FED assisting the smaller banks. Clients know their money is only protected up to $250k. Forgiving student loans, bailing out banks, you’d think the pot had no bottom. Everyone will eventually pay a price for all this…
It is ridiculous that the big banks bailed the smaller ones out. This adversely impacts their financial position and makes them less financially viable. Also don’t agree with the FED assisting the smaller banks. Clients know their money is only protected up to $250k. Forgiving student loans, bailing out banks, you’d think the pot had no bottom. Everyone will eventually pay a price for all this…
The price of a systemic bank rout impacting many banks outside the bigs and some local hyper-captialized banks would be a disaster and everyone would pay more and sooner.
The price of a systemic bank rout impacting many banks outside the bigs and some local hyper-captialized banks would be a disaster and everyone would pay more and sooner.
There may well be a furthur banking crisis anyway. Many have lost faith in banks and might pull money and place it elsewhere (e.g., mm funds at brokerages). How do you justify guaranteeing that bank clients with more than $250k will be made whole? They knew full well their $ was only protected up to this amount, but decided to put it there anyway. I read that executives sold stock shortly before all this happened and one CEO fled to his $3 mil. home in Hawaii. Is the government going to step in when every business fails? This insanity must stop.
There may well be a furthur banking crisis anyway. Many have lost faith in banks and might pull money and place it elsewhere (e.g., mm funds at brokerages). How do you justify guaranteeing that bank clients with more than $250k will be made whole? They knew full well their $ was only protected up to this amount, but decided to put it there anyway. I read that executives sold stock shortly before all this happened and one CEO fled to his $3 mil. home in Hawaii. Is the government going to step in when every business fails? This insanity must stop.
If the bank had no assets, then limiting the depositor insurance to $250k would be reasonable. If the bank has assets that cover large portions of the deposits at current prices, and will more than cover them at maturity, then making depositors whole is the right thing to do. It's sort of like bankruptcy, where the more assets there are, the more the creditors get. I am completely opposed to scalping the depositors while the FDIC or other entity just takes the assets.
If the bank had no assets, then limiting the depositor insurance to $250k would be reasonable. If the bank has assets that cover large portions of the deposits at current prices, and will more than cover them at maturity, then making depositors whole is the right thing to do. It's sort of like bankruptcy, where the more assets there are, the more the creditors get. I am completely opposed to scalping the depositors while the FDIC or other entity just takes the assets.
The FDIC insures that depositors will get back a maximum of $250k. They may well receive more; this would be decided as bank assets are sold off. What the government should NOT do is step in and guarantee that all depositors will be made whole. This is terrible precedent. Is the government going to step in and save every business from failing?
I haven't looked at the FDIC chart in a while but I think the range is 1.5 to 40 basis points. 1.5 for a well very capitalized bank and 30-40 for a less than well capitalized bank.
Ergo as the Fed. has backstopped all current, and I think future, deposits into SVB I'd guess FDIC insurance costs on $250K would be $37.50 (250,000 x 0.00015). But again that is a WAG. For all I know there is a set receiver rate that is above 1.5 basis points.
In reality it's much more complex than this. There are credits, bracketed prices and I think the money center banks sometimes pay zero.
ETA - OK I looked it up....I'm fairly sure the fees are still 1.5 - 40 basis points.
There may well be a furthur banking crisis anyway. Many have lost faith in banks and might pull money and place it elsewhere (e.g., mm funds at brokerages). How do you justify guaranteeing that bank clients with more than $250k will be made whole? They knew full well their $ was only protected up to this amount, but decided to put it there anyway. I read that executives sold stock shortly before all this happened and one CEO fled to his $3 mil. home in Hawaii. Is the government going to step in when every business fails? This insanity must stop.
Insanity has nothing to do with this.
You are right we may endure a banking crisis anyway. There would have been a banking crisis for certain without swift and decisive action.
SVB's executive team being idiots is one matter. Protecting depositors in efforts to forestall a systemic bank run or series of runs is another. That's why big depositors were made whole.
There is no other industry in which one business failing very well might cause several or many others to fail and tank the entire economy in the process.
If the bank had no assets, then limiting the depositor insurance to $250k would be reasonable. If the bank has assets that cover large portions of the deposits at current prices, and will more than cover them at maturity, then making depositors whole is the right thing to do. It's sort of like bankruptcy, where the more assets there are, the more the creditors get. I am completely opposed to scalping the depositors while the FDIC or other entity just takes the assets.
Outstanding analysis.
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