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Comment by sidewndr46 | Hacker News Reader

Last years bank collapse has demonstrated that FDIC coverage is infinite so long as you have the right connections.

Also FDIC limit is theoretically a lifetime limit per individual. Again, no actual limit so long as you know the right people.

Also worth pointing out that when financial institution failure hits people personally regime changes follows quickly. It'd be at the ballot box in the US, but make no mistake it'd come swiftly. As a result, politicians will do whatever it takes to prevent that from happening.

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> Also FDIC limit is theoretically a lifetime limit per individual.

As far as I know that is not true. Why do you say that? FDIC limits are applied per bank, per individual, per account type, but there is no individual lifetime limit, and a common "cash management" account technique is to distribute your money to multiple banks so you can take advantage of each bank's limit.

looks like the rules were changed sometime in 2020 based off this leaflet:

https://www.fdic.gov/resources/deposit-insurance/brochures/d...

I don't know what section of the Federal Register to consult to see if that is actually backed up by something enforceable

> the rules were changed sometime in 2020

What rule are you referring to? FDIC coverage has never had a lifetime limit. That would mean someone who gets an FDIC payout at one bank should rush to pull their deposits at others.

What are you referring to in this document? The only reference to "lifetime" is for revocable trust accounts, which obviously is not the kind of FDIC insurance most people are concerned about.

FDIC went beyond the $250k limit for depositors last year for SVB collapse.

I know that. I was replying to the statement that "Also FDIC limit is theoretically a lifetime limit per individual" which, AFAIK, has never been true.

I'm not exactly sure what they're saying either. My thought with the "theoretically" part was that the insurance funding program wouldn't be able to support widespread failures. Without adjusting funding, average lifetime claims wouldn't be able to sustain 1 failure per person let alone multiple. Sure, the rules don't stop you, but the reality does.

> FDIC coverage is infinite so long as you have the right connections

Which depositors were screwed for not having the right connections?

> FDIC limit is theoretically a lifetime limit per individual

No. It’s not even a limit at the same institution, just per ownership category.

The Big 5 banks have unlimited FDIC coverage because they're "too big to fail" and they scoop up the remains after the FDIC swoops in. Everyone else has the $250k per depositor.

That is why the CRE loans are such a huge problem. Their debt is owed to regional banks, not the big ones.

That said, the FDIC ignored their playbook and rules to try to calm things down last March. A few more banks went down but not the numbers people expected. That means we're in uncharted territory.. will the FDIC follow their own rules next time or do whatever they want? We don't know.

> Big 5 banks have unlimited FDIC coverage because they're "too big to fail"

Less than one year! We had three banks fail—the second, third and fourth largest in our nation’s history—less than one year ago [1]!

None were TBTF, let alone big five. Every deposit was covered. I get that the headline reads hysterically to a lay reader, but less than one year!

[1] https://en.m.wikipedia.org/wiki/List_of_largest_bank_failure...

They were largest failures not largest banks failing.

Going by https://www.federalreserve.gov/releases/lbr/current/ and JumpCrisscross's link, the banks that failed would have been around ~16th largest US bank at the time of failure. I don't know how large Washington Mutual was at the time failure compared to other banks, but just doing straightforward inflation adjustment would put it at #10, and I suspect it's closer to #5 or #6.

> were largest failures not largest banks failing

Correct. The comment I responded to claimed unlimited coverage was limited to the Big 5. We're less than a year from non-TBTF (we let them fail for god's sake) non-big-five banks (a) failing and (b) receiving unlimited depositor coverage.

On paper, yes. Which is why I also said:

> That said, the FDIC ignored their playbook and rules to try to calm things down last March.

There's the SOP and there's what they did, there was no relation between the two which means we have no clue what they might do next time.

> Last years bank collapse has demonstrated that FDIC coverage is infinite so long as you have the right connections.

The intention behind that intervention was clearly to stave off a sector wide run. What held true then and there is by no means guaranteed or even likely to hold true in the event of an actual panic.

Absolutely agree. If you're going to deposit more than $250,000 make sure you have friends in the right places!

You should stop spreading fud - fdic limit is per account name per bank, not lifetime per person. So anyone can put their money into cash sweep that balances it across many banks to stay under 250k limit

Regime changes do not happen at a ballot box.

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