New Rules Change by FDIC

majick

The FDIC change leaves wealthy bank depositors with less protection.


https://finance.yahoo.com/news/the-fdic-change-that-leaves-wealthy-bank-depositors-with-less-protection-160017344.html

yogibearbull

FDIC just closing some loopholes, https://www.mutualfundobserver.com/discuss/discussion/62155/fdic-limits-insurance-with-tricks/p1

Old_Joe

Darn! Now we need to split up the $968,000,000 in our checking account. How pesky.

msf

Until the FDIC stops protecting uninsured depositors, this change is largely form without substance.

A few sentences from a NYTimes subscriber-only opinion piece (May 1, 2024)
https://www.nytimes.com/2024/05/01/opinion/fdic-insurance-banks.html

When Banks Fail, Why Do We Keep Bailing Out Uninsured Depositors?

[Michael] Ohlrogge, an associate professor at New York University Law School, argues that when banks fail, the F.D.I.C. is not resolving them in the manner that is least costly to its Deposit Insurance Fund.
...
It stands to reason that the cheapest way to resolve a bank failure in many cases — maybe most cases — would be to tell those uninsured depositors that their money is gone: “Sorry. See ya, Wouldn’t wanna be ya.”

But in a vast majority of bank failures, the F.D.I.C. approves a resolution in which the uninsured depositors don’t lose a penny [at typically higher cost].
...
Ohlrogge speculates that the F.D.I.C. is experiencing “mission creep,” taking on a responsibility for uninsured depositors that it was never assigned.

This is a copywrited, paywalled piece. I'm not going to reproduce more here. Ohlrogge's paper, Why Have Uninsured Depositors Become De Facto Insured? (Nov 15, 2023) is freely available and covers the material in more detail.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4624095

WABAC

msf said:

Until the FDIC stops protecting uninsured depositors, this change is largely form without substance.

A few sentences from a NYTimes subscriber-only opinion piece (May 1, 2024)
https://www.nytimes.com/2024/05/01/opinion/fdic-insurance-banks.html

When Banks Fail, Why Do We Keep Bailing Out Uninsured Depositors?

[Michael] Ohlrogge, an associate professor at New York University Law School, argues that when banks fail, the F.D.I.C. is not resolving them in the manner that is least costly to its Deposit Insurance Fund.
...
It stands to reason that the cheapest way to resolve a bank failure in many cases — maybe most cases — would be to tell those uninsured depositors that their money is gone: “Sorry. See ya, Wouldn’t wanna be ya.”

But in a vast majority of bank failures, the F.D.I.C. approves a resolution in which the uninsured depositors don’t lose a penny [at typically higher cost].
...
Ohlrogge speculates that the F.D.I.C. is experiencing “mission creep,” taking on a responsibility for uninsured depositors that it was never assigned.

This is a copywrited, paywalled piece. I'm not going to reproduce more here. Ohlrogge's paper, Why Have Uninsured Depositors Become De Facto Insured? (Nov 15, 2023) is freely available and covers the material in more detail.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4624095

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