This wasn’t on my bingo card.
** The Federal Deposit Insurance Corporation (FDIC), which protects insured bank deposits, may be facing changes. According to CNN, in late 2024, then-President-elect Donald Trump’s allies were talking about potentially dismantling the FDIC and putting the U.S. Treasury in charge of deposit insurance.**
I’ve been watching this FDIC stuff like a hawk. I read the article earlier today and didn’t find it very helpful.
If there is a bank run, I want to beat the rush.
Just the fact that the current administration s talking changes makes me extremely nervous. The FDIC has worked well for over 90 years and their costs are paid entirely by banks.
I’m sure that is part of the “problem”. The other is the FDIC’s regulatory powers. We know the mantra “must not burden the JCs”. When the choice is the ease and profit of the banks, vs the safety of the savings of Proles, who do you think will be taken care of? Remember “Rant #37”?
Steve
I moved a sizeable (for me) chunk of my cash from money markets to treasuries about a month ago. Now I am not even sure of that money.
According to Project 2025, deposit insurance is a poster child of expensive regulations that stand in the way of „free banking“ - see note 24 on the last page.
It has allowed you and your fellow depositors to carelessly shed your responsibilities as creditors, instead of monitoring your banks‘ investment portfolios like a hawk in order to front-run possible bank runs:
Project 2025’s view of deposit insurance is that it interferes with proper market discipline. The call to ditch it is part of the movement’s vision of a diminished Federal Reserve and a return to “free banking,” which existed briefly in the 19th century. “Reforms should also strengthen the incentives of bank depositors … to monitor bank portfolios. Deposit insurance undermines [that], as even President Franklin Roosevelt recognized,” the tract says.
Some industry lobbyists argue depositor insurance being a subsidy from large to small banks, as many depositors would otherwise, without protection, gravitate towards the larger, supposedly „safer“ institutions.
It’s often said in my line of work that occupational safety regulations are written in blood…meaning they address problems that have seriously injured or have killed workers. Other regulations are in place to protect people as well.
This administration has either forgotten this, or is willfully tearing down regulations knowing people will get hurt.
My money is on the latter. We’re being governed by monsters.
It makes so much more sense from a ruler’s perspective than from ours - (1) fulfill campaign promises given to providers of free speech (2) align to the correct ideological path - less regulations, more „personal responsibility“ (3) there will be so much more leverage over people if they have to live in insecurity and fear - triple win!
(insert comment about Proles being expendable meat)
Steve
“deregulation” will, no doubt, result in “JCs” being “free” to lie about their company’s financial condition, even more than now.
Steve
Fixed it for you:
(insert comment about JCs being expendable meat)
At the NTSB they talk about the FAA having a “tombstone mentality”, meaning less than half the NTSB safety recommendations are followed and mandated by the FAA, until there’s another crash of the same cause, in which case the recommendation belatedly becomes “required.”
Of course the airlines would be free to implement the recommendations by themselves, but that would cost money and that would put each individual airline at a cost disadvantage vis a vis the others, so they “can’t”, and don’t. Then when everybody has to play on the same level playing field, they do.
Meanwhile another 300 people are dead.
FDIC ic created by the act of congress and as such executive doesn’t have the power to dismantle it. Trump has iron grip on the party and mostly the elected rep’s tow his line. However, if they touch this, literally overnight they are collapsing the entire US financial system.
I am sure there are voices within the administration that will prevail.
Such considerations don’t seem to be inhibiting him with other agencies.
The problem is the voices don’t care about the rule of law nor do his followers. It seems White collar crime is ok.
We need to be careful in how we describe things that we don’t like. If Trump administration wants to dismantle FDIC, that is a policy choice, not a crime. How you implement the policy needs to be seen. There are many who would argue, what FDIC had done during GFC, or even SVB crash during 2023 are beyond its mandate, or some sort of a crime by unelected bureaucrat. The reason I am pointing that is, loose definitions are sub-optimal.
I still think, there are many reasonable people think the FED, FDIC, and many bureaucracy have grown beyond their original mandate, and it is time to rein them back. Between dismantling and arbitrarily changing the definition of what is insured overnight there has to be an medium.
The pendulum has swung too far on one side, to bring it to equilibrium some argue it has to swing on the other side. It is important to not to overreact.
PS:
For those who were not familiar, FDIC insures $250K deposit. However, SVB, which had bulk deposits from the Silicon Valley tech firms, experienced bank run, and FDIC in its bid to stop the contagion effort, insured all the deposits. This action, might have saved the contagion effort, but it didn’t help change/ punish the market participants behavior, especially the bank growing too reliant on one sub-industry (like VC funded firms deposits), failure of the regulators, failure of the VC tech firms depositing all their money, failure of the bank, when they created long-term assets (treasuries) with what are essentially short-term liabilities (bank deposits), a federal reserve raising rates so fast, bank responding to the changing rates by selling and buying new set of treasuries, and botching the sequence of selling first and then raising capital, lastly, how some big VC firms were made aware of the news and essentially caused the bank run, because the VC firm told all their portfolio companies to withdraw money, and the news spread and everyone was withdrawing deposits and bank was paralyzed for 24 hours and not shutting down the bank run or money transfer immediately, …
It may seem I am listing too many things, but the best antidote to the ill-behavior, is those participants pay a price. Except SVB shareholders no one paid the price, SVB bond holders, big customers, regulators, VC firm(s) that started the bank run, no one paid the price.
Capitalist system works only when these people also pay a price. If they are not paying the price, then the system that encourages such behavior requires some shake-up.
Actually the Congress is the only one who can end a government agency under our constitution. So yes it is a crime. Minimizing crime allows bigger crimes to become normalized.
That is your perspective but this is not for one person or branch to decide. This is written into the constitution. It must be decided by congress and then signed into law by the President. This matters, because only by following the constitution can we all agree, even though we might not like it, about what it being done. It seems that some people would like to side step the process and break the law. I think your perspective of reasonable does not reflect the center.
I agreed with that but now that the far right has elected, again, someone that is willing to sidestep laws and upend norms I no longer agree. I won’t be put in shackles that one side, who voted for this, would like. If you do this only keeps the goal post moving further and further to the right instead of the center. It will take a massive move to the left to right this and undo it.
That is not entirely correct, the FDIC insures $250K deposit for each and every person’s name on an account. So if 10 people are on the account the deposit is insured for $2.5 million.
You are misquoting me… I said, how they implement needs to be seen. saying we want to dismantle FDIC is not a crime. You cannot call everything that you disagree as a crime.
How you can be technically correct, missing the point and arguing against a strawman. I was not arguing the deposit value or certain exceptions, etc. I argued how FDIC unilaterally increased the deposit insurance from $250K to many millions. That is the true crime. Because when they did that, the cost is paid by everybody, yeap, FDIC recoups the cost with special assessment on every bank, which is then passed on to every bank customer.
Is any one seeing similar issues for SIPC, (Securities Investor Protection Corporation
Up to $500,000, including up to $250,000 for cash.
What it covers: Stocks, bonds, mutual funds, money market funds, and other securities held in brokerage accounts.
Website: www.sipc.org),
or NCUA, (National Credit Union Administration insures deposits at credit unions, up to $250,000) ?
Asking for the proverbial friend.
ralph
Just to be clear, I have already made that point in upstream.
It is important for general public, democratic party and its supporters to understand this and respect this.
Disrupting, questioning the system is how fundamentally progress is achieved. Saying Trump, his administration, supporters do not have that right is dangerous. Don’t do that. Rather argue the merits of the proposals.