What did the depositors do wrong? You're saying in a just world, the individuals and businesses who just decided to open a checking account—at a top-20 US bank—deserve to lose everything? What did they do wrong?
Businesses should better manage their risks, and advisors such as VCs should be helping them do that. Bank runs aren't new and _shouldn't_ be surprising (in the sense that they are possible, not in the sense of any particular occurrence). It is well known how much the FDIC insures, so beyond that amount you are taking on a risk with the financial institution. I have family that uses multiple banks just for that reason, both to for insurance coverage and to address any short-term liquidity issues that might arise before the FDIC enabled repayment.
There probably should also be better services out there for outsourced corporate treasury functions. ICD exists, but probably is too costly and specialized for smaller firms.
I think it's fine if the new precedent we're setting is that the FDIC backs any amount of money on deposit for everyone going forward.
If that is not the new precedent, then this is a bailout of rich individuals and some specific corporations. That doesn't seem a problem to you? If the savings and loan of Bismarck North Dakota fails, is the government bailing out the car lot owner and the wheat farmer and the home builder?
> If the savings and loan of Bismarck North Dakota fails, is the government bailing out the car lot owner and the wheat farmer and the home builder?
Yes, the depositors would get bailed out, but the bank itself would be sold for parts. That might constrain the way that retail deposits are allowed to be managed.
A start would be undoing the Trump administration's rollback of Dodd-Frank stress testing requirements for smaller banks [1]. It will probably also mean the FDIC will require more insurance on deposits. This will all hurt profitability of banks, and reduce risk for depositors.
> Above the 250k limit, that is not normally the case. The joint statement is creating a special situation here.
Yes, the special situation will likely become the new normal. There will be pressure to reintroduce the Dodd-Frank stress tests that the Trump administration (with the help of many banking-industry-aligned Democrats) eliminated in 2018 for banks with < $250M in deposits, and there will be greater insurance required on deposits.
Just 4 years after that change, the lessons of 2008 will have to be relearned.
IANA-Economist, but I believe the reason that capitalization requirements aren't sufficient is because of the "Last Taxi Problem", described in this article:
Tech companies should understand the risks with banks the same way banks need to understand tech risks. If a bank got ransomwared because they left the password to their webserver root/root no one in tech would ask "what did they do wrong?".
There probably should also be better services out there for outsourced corporate treasury functions. ICD exists, but probably is too costly and specialized for smaller firms.