Richard J. Herring, co-director of The Wharton Financial Institutions Center said, “I would think your strategy ought to be to disclose as much as possible to people who professionally need to know about it …”
Gary Cohn, former director of the National Economic Council, said, “I almost think you’d scare the public if you put this out — like, ‘Why are they telling me this? Should I be concerned about my bank?’ … I think you’ve got to think of the unintended consequences of taking a public that has more full faith and confidence in the banking system than maybe people in this room do …we want them to have full faith and confidence in the banking system. They know the FDIC insurance is there, they know it works, they put their money in, they get their money out…”
This was followed by some laughter, which critics have interpreted as a cynical agency warning the wealthy while leaving the smaller investors to eat the losses, similar to the phone calls to the favored few before the 1929 stock market crash. But the clips have to be taken in context. Here is that whole section (taken from the video transcript beginning at 1 hr. 15 min)
Same thing that happened in China before the government cracked down.
FDIC Systemic Resolution Advisory Committee - November 9, 2022 Webcast
WARNING: 3 HOUR MEETING
We have had this problem before. The last one happened on October 24, 1929.
wy69
So what’s the little guy to do, T-bills, hide it in the mattress, bury it in the back yard?
Thankfully I keep all my bank accounts under $250k....
The FDIC printing press will be working overtime to bail out depositors and the over-leveraged banks.
Journalistic mal practice
If banks had been paying inflation beating rates on CDs, the federal government could not have gone on a cheap debt financed vote-buying orgy.
I keep my cash in a Federally insured credit union that appears pretty safe, but also keep a bunch of silver that I will continue to add to as this progresses. I don’t see inflation going away anytime soon (maybe a temporary reprieve), so will gradually switch out of my remaining cash into precious metals.
The whole Song and Dance sales pitch in 1913 was the federal Reserve ( it’s not Federal and there is no reserve its just a name )
was to prevent booms and busts.
They failed. Get rid of it.
More to the point, when it looks like banks *might* go bust, either the feds, *or the bank itself* might declare a “bank holiday”. This means that depositors can no longer withdraw their savings, and that the banks “instruments”, like checks, are temporarily invalid.
In the Great Depression, some bank holidays lasted from 30 to 300 days. And has been noted, FDIC insurance may end up only covering a tiny fraction of deposits.
Which is why “mattress money” is not such a bad idea.
It should be noted again that all the paper money in circulation is only enough to cover less than 4% of daily retail in the US. So if there is a banking and credit collapse, paper money will overnight be worth 20 times its face value. That is, a nickel will be able to purchase what costs a dollar right now.
But after a short stint of retailers only accepting physical cash, there just won’t be any in private hands, so merchandise will also have massive price deflation.
During the Great Depression, this was described as “You could buy a pound of hamburger for a nickel, but nobody had any nickels.”
Banks are part of the financial structure that includes insurance companies and other financial entities. Think of how bricks and mortar work together. If you want to keep the structure you can’t have either one fail.
So ... What does everyone think is going to happen next week?
Will everyone with more than $250,000 in a single account (think rich people and companies) start pulling their money out and spread it around to other banks to keep their accounts under 250K?
When they do that, where will the banks that they currently have their accounts get the money ... they will be selling assets (bonds and securities) to generate the “cash” for their customers. And when they sell these bonds securities (basically mortgage back securities at 3.5% or less), they will be taking losses.
Now multiply this by hundreds of banks around the country ... how many more banks by the end of next week will be in a liquidity crisis? More bank failures in the coming weeks?
Now, will the Fed reverse their monetary policy and begin another QE? If so, then inflation will start jumping up again and the dollar will drop like a rock.
It is looking like a damned-if-you-do, damned-if-you-don’t situation.
As news of SVB’s failure trickles down through the news to reach consumers over the weekend, and those who seldom pay attention to stories of the day, I suspect there will be lines at some banks come Monday morning.
Here is some of the lines from yesterday. It looks relatively small, but how often lately have you seen that many customers in a bank lobby at one time?