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by Dem_Boys 1196 days ago

With this news, I'm opening a bank. Here is my business plan:

1. Make risky investments and offer better terms than other banks

2. Watch business flock to me

3. Get filthy rich on yearly bonuses

4. 10 years later my risky investments blow up (Make sure to sell stock before)

5. Get taken over by the FDIC

6. Don't return those years of bonuses

7. Let other banks pay for my wrongdoing with a "special assessment"

8. Walk away as a filthy rich failed bank executive

5 comments

Not very original. It's been done over and over again during the S&L crisis and later.

The Best Way to Rob a Bank is to Own One.

Is this any different without steps 5 and 7? I don't understand how the FDIC actions change the incentives here.

Presumably, #2 is only possible with a government guarantee for depositors.

The FDIC's actions indicate that the insured deposit limit is really unlimited instead of the advertised $250,000.

This takes away a huge risk associated with recklessly handling depositors money because now the FDIC will swoop in and make ALL depositors whole.

Way fewer people hate you at the end, which is a meaningful disincentive otherwise.

A lot of people would lose money and the system would have to change.

Can't do 8 without those!

9. Get hired by another bank as CFO (See Lehman Brothers/SVB for a tutorial)

10. Repeat

Presumably, #2 is only possible with a government guarantee for depositors.

This is really the typical arc of a hedge fund far more often than banks.