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Comment by zefalt | Hacker News Reader

No, your money should not have zero risk. There is always risk in the system. The FDIC was created as an insurance for this specific risk hence the name (Federal DEPOSIT INSURANCE Corporation). This was mainly to help the common person when bank failures were more prevalent...not the wealthy who were the predominant beneficiaries of this bailout.

You should learn that you the moment you put a deposit in the bank, the funds become the property of the depository bank. As a depositor, you are a creditor of the bank.

People are mad because the rules were changed in the middle of the game to serve the interests of a select few (mainly VCs and the startup crowd).

Those supporting this bailout seem to have some of the least knowledge on how banks work.

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If there's risk, I should be compensated for it with interest on the account.

I'm fine with banks being not for profit institutions run by the government. Allowing people to safely store their money is baseline civilization. If banks are private, the government is going to have to back them up because you can't have the operational accounts of nearly every business in the country getting wiped out randomly.

It makes very little sense to treat depositors as risk takers. These aren't people investing in stocks or bonds. These accounts are places to park your cash. It would be very bad to discourage deposits.

Putting a ceiling on FDIC insurance is effectively an outdated idea that doesn't work.

Take the example of a company that keeps payroll in a cash account. Let's say that company has 100 employees. Should the FDIC treat the account as belonging to 1 person or 100? If you say 1, I say you are irrational.

They are choosing to place money in the bank. This is a risk in and of itself.

Companies with treasury departments already know this. They can put money in money market funds, CDARs, cash sweeps, or any other vehicle to protect their cash. There are multiple ways to hold cash with very low duration risk that does not involve putting it in a bank.

FDIC is not an outdated idea. It is just the reality of the current financial system because it would require an excess of $20 trillion dollars to insure every deposit in the banks.

Although I knew about the FDIC coverage limit, it seems many did not. I've never had enough cash to test this, but I suppose I assumed if you put $251K in a bank account the web page turns red or something, or a dude calls you up to warn you that the last $1K is at risk. I'm guessing now that doesn't happen.

Most depositors treat US banks as magic entities where they can safely store unlimited amounts of funds.

Why, I do not understand.

This, exactly this. If my bank had collapsed and I had more than $250k in the bank we know the FDIC's answer would be "there is a limit of $250,000 for deposit insurance".

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