[ncallaway]

> It would seem that the logical response to this announcement is go run the banks right now,

Is there a reason I shouldn't rely on the FDIC (or NCUA for credit unions) insurance?

Is the expectation that if banks systematically fail, FDIC won't be able to cover all of the losses?

[mumblemumble]

Dropping reserve rates to zero massively increases FDIC's and NCUA's risk exposure, and simultaneously increases the size of craters that individual banks can make.

FDIC and NCUA are not bottomless pits of money, and I expect that, with a key safeguard removed, banks and credit unions now have the power to discover their bottoms more quickly than anyone should care to contemplate.

I should disclaim: I am not a banker, I am just a completely random person on the Internet, possibly a troll, and certainly someone who occasionally posts with a trollish twinkle in their eye. Don't take this as financial advice. Anyone who assumes I know what I'm talking about will get what they deserve for their efforts.

[ncallaway]

> FDIC and NCUA are not bottomless pits of money

"FDIC insurance is backed by the full faith and credit of the United States government." [1]

Given that FDIC insurance is backed by the United States government, if the FDIC system is unable to cover its losses, wouldn't that represent the United States defaulting on its obligations?

I'm not saying that's impossible, but it seems like FDIC could represent a...pretty large bit of money.

[1] From: https://www.fdic.gov/deposit/deposits/faq.html

[AgloeDreams]

I mean the FEd is currently considering what will amount to a near $1T aid Package as well, so I don't know how much the fed has on hand bit it really can't be much much more than 2T or so. So maybe.

[mech1234]

Try not to confuse the Federal Reserve (the Fed) with the Federal Government.

[nybble41]

The FDIC can get as much currency as they need from the Treasury to cover their obligations, so in that very technical sense they aren't likely to default. However, in the event this were ever actually tested they might as well have defaulted since the resulting inflation would be so high that currency would be worthless. Going from "can't get your money out of the bank" to "your money can't buy anything" isn't exactly an improvement.

[ncallaway]

(I realize this is pretty old, but I just came back to look at this, sorry)

> However, in the event this were ever actually tested they might as well have defaulted since the resulting inflation would be so high that currency would be worthless. Going from "can't get your money out of the bank" to "your money can't buy anything" isn't exactly an improvement.

While I could see this being true, I don't see how pulling cash from my bank and storing it under a mattress helps this scenario at all. Inflation hurts every dollar equally, regardless of whether it's stored in my bank, under my mattress, or is sent to me from the FDIC.