Sign of things to come? SVB fails

[OKCRealtor]

Yellen says no bailout :

This should be a lesson to anyone with these types of funds sitting in a bank to make sure it's FDIC insured & to diversify them between multiple accounts/banks backed by the FDIC.

[jn1780]

And the average person is thinking 250,000? That must be a nice problem to have.

[PoliSciGuy]

Should the FDIC increase the coverage from quarter of a million to half a million? I realize that's still a drop in the bucket in this case as 97% of SVB accounts were over the FDIC covered amount. Just wondering how long it's been since FDIC adjusted for inflation.

Last time the insured amount was adjusted was in 2008, when it increased from $100,000 to $250,000. Doubling it again could make a little bit of sense but yeah as you mentioned that would be a drop in the bucket for the amounts at stake here

[OKCRealtor]

And the average person is thinking 250,000? That must be a nice problem to have.

I think you might be surprised at how many "average" people have that amount laying around. A quarter mil doesn't quite have the same ring to it that it once did.

[BoulderSooner]

I think you might be surprised at how many "average" people have that amount laying around. A quarter mil doesn't quite have the same ring to it that it once did.

the "average person" . doesn't have anywhere close to that ..

more than half of woking americans make less then 75k the median man earns 50k women 36k


42% of americans have less then 1k in savings ..

more then half of americans have under 6k in the bank

[PoliSciGuy]

I think you might be surprised at how many "average" people have that amount laying around. A quarter mil doesn't quite have the same ring to it that it once did.

It's still a number that only the top 30% or so have, and most of that is in 401ks and IRAs. In fact, taking out retirement funds, only 20% of Americans have savings in excess of 50k, so the number having excess of $250k is still very, very low.

[OKCRealtor]

the "average person" . doesn't have anywhere close to that ..

more than half of woking americans make less then 75k the median man earns 50k women 36k


42% of americans have less then 1k in savings ..

more then half of americans have under 6k in the bank

It's still a number that only the top 30% or so have, and most of that is in 401ks and IRAs. In fact, taking out retirement funds, only 20% of Americans have savings in excess of 50k, so the number having excess of $250k is still very, very low.

Top 30% is nearly 100 million people- thats a huge percentage of the population with at least a quarter mil assuming that figure is accurate. Considering nearly 1/10 are Millionaires now there are a ton of average people out there with 250k.

[PoliSciGuy]

Top 30% is nearly 100 million people- thats a huge percentage of the population with at least a quarter mil assuming that figure is accurate. Considering nearly 1/10 are Millionaires now there are a ton of average people out there with 250k.

Again, that's 30% with a quarter mil *in retirement accounts*. Those aren't (or shouldn't be) just sitting in a bank account but are in 401ks and IRAs which aren't really relevant to this discussion. In fact, I doubt even millionaires (which is more like 8%, not 1/10) have $250k just sitting in bank accounts. Most of the wealthy don't rely on liquidity just sitting around.

The $250k limit is only an issue for the elites in the US. For the vast majority of us, it's more than enough.

[BoulderSooner]

Top 30% is nearly 100 million people- thats a huge percentage of the population with at least a quarter mil assuming that figure is accurate. Considering nearly 1/10 are Millionaires now there are a ton of average people out there with 250k.

almost like it is 30%

but again that is an entirely different conversation l this was about money in bank accounts ... covered by the FDIC not retirement accounts ..

[Scott5114]

Even if I liquidated every asset I own (house, two cars, retirement accounts) and put it all in same the bank, I still wouldn't have $250,000.

I can't imagine I'm the only person that's true for. A lot of people are worse off than I am.

[Teo9969]

I would be shocked if more than 15% had penalty-free liquid assets of at least $250,000. Net worth, sure, but liquid assets? Seems very unlikely.

[floyd the barber]

Even if I liquidated every asset I own (house, two cars, retirement accounts) and put it all in same the bank, I still wouldn't have $250,000.

I can't imagine I'm the only person that's true for. A lot of people are worse off than I am.

Same.

My wife spends all my money though.

[OKCRealtor]

Signature Bank goes down with it, government had to step in at this point as there's clearly a systemic risk. Crazy times.

[Edmond Hausfrau]

I would be shocked if more than 15% had penalty-free liquid assets of at least $250,000. Net worth, sure, but liquid assets? Seems very unlikely.

Money held in trusts is protected by FDIC, if held in a bank. Not talking about stocks, bonds, or mutual funds. Many people set up their trusts with rules about how much has to stay in cash assets.

[Edmond Hausfrau]

Signature Bank goes down with it, government had to step in at this point as there's clearly a systemic risk. Crazy times.

Barney Frank of Dodd-Frank law fame sits on their board.

[HangryHippo]

Signature Bank goes down with it, government had to step in at this point as there's clearly a systemic risk. Crazy times.

Another banker for crypto clients.

[PoliSciGuy]

Signature Bank goes down with it, government had to step in at this point as there's clearly a systemic risk. Crazy times.

Nah. Signature Bank is mainly a crypto-focused bank. Let it die. Also good for the climate if crypto truly crashes, as it deserves to.

[April in the Plaza]

Looks like some kind of bailout might be in place. Futures are awfully green atm.

[Just the facts]

Yellen says no bailout :

This should be a lesson to anyone with these types of funds sitting in a bank to make sure it's FDIC insured & to diversify them between multiple accounts/banks backed by the FDIC.

Do you believe her?

Also, the whole insured deposit thing is now a moot point because the Fed is going to cover 100% of every account. And how are they going to do that? By creating more money from thin air. The Fed has become schizophrenic. Meanwhile back at the ranch, what are we going to do about inflation?

[jn1780]

Three dimensional shell game. It's will be a stealth bailout by the Fed.

[Teo9969]

Money held in trusts is protected by FDIC, if held in a bank. Not talking about stocks, bonds, or mutual funds. Many people set up their trusts with rules about how much has to stay in cash assets.

Sure, but I was mainly replying to the idea that some huge percentage of people have over $250k sitting in a bank account.

Even in your example, if you are an individual and have more than $250k in any one bank account, you're a fool unless you can lose every dollar over that $250k without batting an eye. Even in a trust of substantial size (let's say $10 million), it's not likely that you should need to expose much of that to uninsured deposits. You're obviously not going to have accounts at 40 different banks for those funds, especially given that you wouldn't keep even a majority in direct cash assets.

Corporate/Business holdings are a little different given the small sum of money $250k represents in the business world. So if the argument is increase to $500k so businesses are better protected, I think that increase barely moves the needle.

Generally speaking any individual who needs protection by FDIC probably doesn't need anywhere near $250k protected.

[OKCRealtor]

Do you believe her?

Also, the whole insured deposit thing is now a moot point because the Fed is going to cover 100% of every account. And how are they going to do that? By creating more money from thin air. The Fed has become schizophrenic. Meanwhile back at the ranch, what are we going to do about inflation?

Great question- where does the Fed go from here? Surely there is another solution besides jacking the rates into oblivion and it seems likely they'll have to pause at least temporarily now. Keep raising and risk the whole house of cards falling and the government can't bail out everything. That soft landing is looking like a crash landing.

[Just the facts]

The Fed really has no choice but to keep raising rates. Bank failures might damage the economy, but runaway inflation could end the country. Besides, this bank failure is exactly what needs to be happening. We have $8 trillion dollars that needs to be taken out of the economy to get inflation back to 2%. Some people are going to have a lot less money in 2 years than they have today...a lot less.

And by some people, I mean lots of people. $8 trillion is 1/3 of our entire money supply. That is how much damage Quantitative Easing did.

[ManAboutTown]

Sure, but I was mainly replying to the idea that some huge percentage of people have over $250k sitting in a bank account.

Even in your example, if you are an individual and have more than $250k in any one bank account, you're a fool unless you can lose every dollar over that $250k without batting an eye. Even in a trust of substantial size (let's say $10 million), it's not likely that you should need to expose much of that to uninsured deposits. You're obviously not going to have accounts at 40 different banks for those funds, especially given that you wouldn't keep even a majority in direct cash assets.

Corporate/Business holdings are a little different given the small sum of money $250k represents in the business world. So if the argument is increase to $500k so businesses are better protected, I think that increase barely moves the needle.

Generally speaking any individual who needs protection by FDIC probably doesn't need anywhere near $250k protected.

The huge majority of accounts with over $250k in a bank are not individuals or trusts. They are commercial accounts. I am a commercial banker and my customers generally average well over $250k in their accounts.

If businesses failed because their liquidity was wiped out due to a bank failing, it could be the spark of another recession or depression. The Fed is doing the right thing here by covering these deposit accounts.

[fortpatches]

Even if I liquidated every asset I own (house, two cars, retirement accounts) and put it all in same the bank, I still wouldn't have $250,000.

I can't imagine I'm the only person that's true for. A lot of people are worse off than I am.

You aren't. The median savings in 2019 was $5,300 and the average was $41,600, across the whole US. For the top 10% of income earners, the median in savings is $69,000 and the mean is $229,400. With the median being so much less than the mean, there is a very high positive skew - so you are probably looking at the top couple percent that have over $250k in a bank account.