Not exactly, because banks tell you that they will loan out your money and you might not get it back, that's why you get interest on the account. They can't go horse betting, but they can loan it out. You don't have "title" over the USD in the bank reserves.
This is like if you put $100 in Chase's security deposit box, and they opened it up, took the cash, and lent it out, and then when you come to get it, they say, woops, we lost it all. That would be just straight up theft or fraud.
Civil asset forfeiture is one of those things that feels really unjust in the US, and I'm somewhat surprised there hasn't been a Supreme Court case ruling it unconstitutional per the 4th Amendment.
I'd love to hear a steelmanned argument in favor of it, maybe I'm missing something obvious?
The only steelmanned argument for civil asset forfeiture goes back to its origins, when it was used to seize smuggled goods on ships. Since the ship's owner was almost always a wealthy person living in a different country making them almost impossible to go after, and the smuggled goods were missing tax stamps etc. making it clear that they were being illegally smuggled, the government would simply seize the goods. That's literally the origin of civil asset forfeiture in the US, and all of the horrible and unjustifiable examples of it that we see nowadays grew out of that much more limited and justifiable example.
Seems to me in the specific case of wealthy foreigner owns smuggled good a better (more just) arrangement accuses them not the goods, but with the mechanism that if they for some reason don't want to attend court (maybe because they're super guilty?) their goods are seized but the crime still exists.
There are some nuances to work out to ensure cops can't accuse say Vladimir Putin of a crime involving the $8000 they found in your house, and then since Putin doesn't show up they keep your money, but the general idea seems more sound than civil forfeiture.
> I'd love to hear a steelmanned argument in favor of it, maybe I'm missing something obvious?
If it were a big shipment of plutonium laced heroin, it seems fair game.
I think the biggest issue with civil asset forfeiture is the conflict of interest where police departments are keeping/using the seized assets. From the outside it looks a lot like the government acting like a gang.
The other big problem is it seems like it is up to the owner to prove the assets "innocence", rather than police proving the assets were the result of illegal activity.
If assets are seized, they need to go to a third party that can store them safely, return the assets to their owners. If found "guilty", the assets should go to some victims of crime fund, or destroyed.
Gold is legal. So is cash - in fact it’s legal tender for all debts public or private. By contrast, plutonium laced heroin is definitely not legal without the appropriate licenses from multiple regulatory agencies.
Yeah, I guess I wasn't super clear. I meant seizure of certain things is fair game i.e. Obviously problematic stuff. I didn't mean to suggest that means all things are fair game to be seized.
Looking at Wikipedia's definition of civil asset I see my "in head definition is slightly wrong:
> Civil forfeiture in the United States, also called civil asset forfeiture or civil judicial forfeiture, is a process in which law enforcement officers take assets from people who are suspected of involvement with crime or illegal activity without necessarily charging the owners with wrongdoing. While civil procedure, as opposed to criminal procedure, generally involves a dispute between two private citizens, civil forfeiture involves a dispute between law enforcement and property such as a pile of cash or a house or a boat, such that the thing is suspected of being involved in a crime...
So my use of clearly illegal assets being seized means it wouldn't actually be civil asset forfeiture. Mea culpa!
Civil asset forfeiture is a surprisingly complicated network of related legal issues, unfortunately. It can be incredibly complicated to litigate. Asset forfeiture cases often involve the federal government and have to be litigated in federal court, which is difficult and expensive.
If you want to think of laws as an ecosystem, then think of civil asset forfeiture as a highly evolved species with all sorts of specialized defenses.
It seems to be slowly being ground away. The modern version of civil asset forfeiture was as a tool to take away the profits of drug kingpins in the 1980s and bootleggers during prohibition. Seems like the modern drug kingpins are companies like Johnson & Johnson, though.
No civil asset forfeiture: cop pulls a drug dealer over, the drug dealer bribes the cop and is on his way.
With civil asset forfeiture: cop pulls a drug dealer over, the drug dealer offers to bribe the cop, the cop laughs and takes all his stuff anyway, books him, and the police department buys a martini machine.
Kind of a weak case, but that was the best steelman I could think of.
It sounds like a good idea until a cop acuse you of been a drug dealer without evidence, take all your money, and then you realize why you need a constitution and a independent court system.
> Every year, a few hundred customers report to the authorities that valuable items — art, memorabilia, diamonds, jewelry, rare coins, stacks of cash — have disappeared from their safe deposit boxes.
Asset forfeiture sucks, but I’d be more worried about run of the mill bank incompetence. Banks don’t really want to be in that business and screw up often.
And the FDIC can afford to do that because there are laws dictating liquidity requirements to banks and disclosure requirements to inspect and enforce those rules.
What was that recent quote about cats thinking they are independent, but in fact are completely dependent on a system that they don't understand at all?
You would’ve been correct two years ago. We’re doing zero fractional reserve banking now. Hearing this should convince people that they should get their money out now, but nobody seems to care.
The required reserve amount was reduced to zero at the beginning of the pandemic as a way to increase the velocity of money. We are in ZFRB land right now.
Bank reserves have obviously dropped year over year since the introduction of this policy, especially as a percentage of M1/M2.
I don’t know about others, but I suspect that if the FDIC ran out of money, congress would figure out a way to fund it even if it meant printing money. I am okay with this.
Right, but the FDIC explicitly says large amounts may take longer in the status quo. The only reason to have money in the bank is for a reasonably safe, liquid form of money.
If they aren’t providing safety or liquidity, why should you use them?
Per institution.
And there is a lot of consolidation.
So I would be careful.
It is really easy to be placing money into different banks, but essentially the same one.
A married couple each have 250k coverage for their personal accounts, and each have 250k for shared account(s), so they could in theory have 1M coverage at a single institution.
As others have pointed out in comments on this post, banks typically don't loan out customer funds and instead use them as reserves. For loans, banks can create money out of thin air and just increase the number representing the borrower's bank account balance in a database somewhere. Interest is to incentivize adding more reserves to their balance sheets which in turn allows more loans (with considerably larger interest rates) to be given out
>Not exactly, because banks tell you that they will loan out your money and you might not get it back, that's why you get interest on the account.
That's not right either. They promise you will get it back (the FDIC insurance), just that e.g. large amounts may have a delay. They are also scrutinized by regulators to ensure that the loans are sane enough not to all evaporate in value overnight, as a horse bet might.
Yep, this is exactly what happened en masse during the Great Depression. People were selling their bank account books for a fraction of their nominal value.
1) Chase doesn't have to show you $0, you'll still see $100.
2) When you decide to spend the money, chances are the seller is also with Chase, then all Chase has to do is show you $0 and the seller +$100
3) If the seller happens to be with another bank, Chase will just go in credit with that other bank for $100. The total of such interbank accounts is around 0 as money flows both ways, and, with a decent margin, within the bank reserve amount.
Fractional-reserve banking works so well with so little "actual" reserve money that some consider it counterfeiting.
Eventually the other bank will ask for settlement. Maybe it’s because you owe them a billion dollars and they have a liquidity crisis. Whatever the reason is, you can’t just go on forever “oweing” then money.
Because Chase actually does something sort of similar (primarily mortgage lending), but they employ a ton of people to think all day about managing risk.
So I think people don't like the comparison, since the true difference is FTX did horse betting, while Chase does something much more rational.
To add to that: Chase tells you what they're doing. FTX told its customers it wouldn't lend it out, and then it did. Additionally, customer accounts at Chase are insured by FDIC up to $250k. Chase tells you they're going to bet with your money, manages the risk well* on most days*, and even if they lose your money you get it back anyway. FTX did the opposite of all that.
Chase is also more restricted in how the investment banking side of the business can use funds from the retail banking side, precisely because banks in the 1920s did play fast and loose with investing customer deposits, which caused a bunch of depositors to lose savings in the 1929 crash and associated bank runs.
This is like if you put $100 in Chase's security deposit box, and they opened it up, took the cash, and lent it out, and then when you come to get it, they say, woops, we lost it all. That would be just straight up theft or fraud.