Right, but the FDIC explicitly says large amounts may take longer in the status quo. The only reason to have money in the bank is for a reasonably safe, liquid form of money.
If they aren’t providing safety or liquidity, why should you use them?
They are providing safety and liquidity, your statement is laughable, honestly.
The safety is personal — no one can rob your home when you're gone and steal the money under your mattress because it's not under there, it's in a bank.
And in regards to liquidity, if you can tell me the exact day, time, and amount you tried to pull out of a consumer bank (large household bank names) and instead of getting cash in hand the bank told you "sorry, we spent your money on loans, we don't have any to give you", I'd love to see it.
Bonus points if then the FDIC didn't cover it.
Banks provide both safety and liquidity at the consumer level. It would also be a really bad idea to continue to encourage everyone to pull money out of banks and hold it in cash — both economically and personally. People largely benefit from banks existing, that's, well, why they exist!
> Right, but the FDIC explicitly says large amounts may take longer in the status quo.
Right, you can’t ramp up the printing presses instantly — which is literally what they would do if they had to.
I think people are missing the point that if it ever got so bad the FDIC had to worry about covering everyone your biggest worry would be the roving gangs looking for the Mormon food caches.
The FDIC, as of March 2021, has 119.4 billion[0], along with "... a US$100 billion line of credit with the United States Department of the Treasury.[9]"[1].
I think they've got enough to cover any consumer issues.
Bank of America has an estimated 67 million customers. Assuming $250k per person, and I've got the number of zeros right, that's $16 trillion ($16,750,000,000,000) in liability if they were to go down, enough to sink FDIC.
I think you got the math wrong, because I'm 100% sure not all 67million customers have $250,000 in their accounts. Being that 56% of Americans can't cover $1,000 expense[0], and most people with >$100k assuredly have their money in assets rather than cash, I think your math is way, way, way off.
How much is the total liability they are guaranteeing?
And $119 billion where exactly? In US treasuries? If so it's about as safe as the social security "fund". What if the "customer issue" includes a govt default?
All you're saying here is that we can treat an FDIC guarantee like a govt guarantee, which is probably true, but still not the same as a case where the guarantor has actual assets which the prior poster was suggesting. The FDIC is making promises and backing those promises with other promises. There's not cash laying around anywhere to back it up. I'm not saying the only response is run for the hills like the other poster, but I find these defenses rather naive. The likelihood of any insurance scheme failing is not zero. Same for a government's finances.
> There's not cash laying around anywhere to back it up.
Did you not read the part where they have $119.4 Billion dollars? And that was a year-and-a-half ago, it's probably closer to $130B now. It seems like you didn't read any of the source material, let alone my comment, before replying.
...yes I did. Your post at least, which was short and sweet. Bravo. I did not read the wiki article and don't plan to, but I skimmed the other one. Got as far as this at least: "Means and Strategies: The FDIC maintains the viability of the DIF by investing the fund, monitoring and responding to changes in the reserve ratio, collecting risk-based premiums, and evaluating the deposit insurance system in light of an evolving financial services industry."
"DIF fund" being the $119B. In my post I presumed that 119 billion is in US Treasuries. I'm also presuming US treasuries are not the same thing as cash. Whatever the case, generally people don't refer to "cash laying around" as an investment.
[0]:https://www.federalreserve.gov/monetarypolicy/reservereq.htm