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Comment by Betelbuddy | Hacker News Reader

>> People just give them money as a business model.

You dont actually give them money...you loan them money when you do a deposit. That is why they pay you interest, and that comes with the risk of loans to another party.

A little detail they are happy to omit and they are happy to let people talk about: "I have money in the bank", that you of course ...dont have.

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At least in the US most banks are FDIC insured so your first $250k or so in deposits are secured by the government.

There's no real risk involved.

> At least in the US most banks are FDIC insured so your first $250k

More if you're in Silicon Valley… semi-/s

Ehhhh, I'll take a law over begging and praying.

* https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Ban...

The existence of the FDIC is in itself, the proof there is risk involved :-)

As of June 2026, the FDIC had approximately $161 billion in its insurance fund against...drum roll... $10.8 trillion in insured deposits.

Good luck calling on your insurance on a systemic bank crisis....

Even when the current funds available are insufficient, it can borrow from the federal government or issue debt to cover the insured deposits.

A situation which calls that borrowing capability into question would mean the economy is so bad the dollar is worthless.

This particular insurer is unlike others because it can ultimately edit entries in a database whenever it wants. As long as you are part of the group that is considered worth editing the database for, such as a depositor at one of the too-big-to-fail banks, then you have nothing to worry about.

Incorrect-ish. 12 U.S.C. § 1821(f)(1) states that payment shall be made by the FDIC "as soon as possible," but as my sister-the-lawyer has always been at pains to point out to me, the most up-to-date specific language is from 2016's 81 Federal Register 87734, 87735, section B, which explicitly states that they "[do] not specify a time period for paying insured depositors." In other words, if it's a tiny bank failure you might get lucky and get made whole in a few business days, but if it's something larger, they can choose to meet their regulatory obligations over the course of decades - which is very much real risk.

I mean, I get it, but that would destroy any credibility of the insurance, and would undermine the whole point of the system.

I trust the FDIC to be far more johnny on the spot to resolve a liquidity issue than I do any private entity

Most banks also don't have cash on hand if you want to go in and walk back out the door with a large life savings. The fact that large sums are not instantly liquid isn't especially worrysome.

It'll be a hardship if a bank does liquidate and the FDIC takes some time to reimburse everyone involved, but that's better than not getting anything at all.

The interest rate banks pay you has been 0% since before covid

Zero is also a number, although not all Mathematicians accept that. 0% interest does not change the essence of the monetary relationship with your bank, or the risk profile.

That's definitely not universally true; my US bank pays 3.2% interest on savings

And what is inflation?

A general, continuous increase in the overall price level of goods and services in an economy over time.

Not really related to the discussion here though, since we were determining whether the interest rate is zero.

Any interest rate that is equal to or less than inflation is functionally zero (or less).

That is also true.

But if they pay you roughly the inflation rate as interest, doesn’t that mean the use of your money is roughly free to them?

Yes, and alternatively you could invest your money in whatever they'd invest it in, and capture more of your money's value. You could even invest in risky things like stocks with your money, whereas they can't (with your money).

My bank in the uk pays me 3%

I have been able to easily find a US bank that pays roughly SOFR minus 25 basis points for FDIC insured savings accounts, even before 2020.

This is a thread about a EU bank, and banks in the EU both have some standard interest rate on savings accounts, and moreover might offer time-restricted savings accounts with an even higher rate. That said, they track poorly with inflation compared to actual investment.

Ally has been 2% from before Covid and currently is at 3.2%

I get 4% (instant access savings account with Revolut, UK)

isnt it the opposite in parts of the EU? you pay interest on the deposit

I don’t know of any bank that hides the fact they lend out money. Most pretty actively advertise it.

Technically true I suppose. But go ask the average person on the street where the bank gets the money they lend people for mortgages and cars and such and I guarantee you the number of people that make that connection is going to be much much smaller than you seem to want to suggest.

It doesn't actually work the way it's portrayed in It's a Wonderful Life. The banks don't use depositor money to make loans. I suspect you will think what they actually do is even worse. Look into fractional reserve banking.

Never seen that movie but did watch a documentary ages ago about fractional reserve banking yes.

The bank still uses the deposit money in that system. You are right to point out those same people on the street I mentioned would freak out even more if they knew that banks essentially lend out more than we deposited and also that they might sell your debt and all that jazz (I bet most people either never understood what happened in 2008 or forgot already other than a vague "yeah mortgage crisis")

>> I don’t know of any bank that hides the fact they lend out money.

Absolutely true. They question here is how many announce they are borrowing from you :-)

This is like those articles that say, "[entity] quietly [doing totally normal thing]" to frame it like it's some devious thing.

That's what banks do. It's not a secret. Any cursory understanding of banking gives you that information.

Why else would they be paying us interest for the privilege of providing us with banking services? I know that the real answer is because the government tells them they have to (do both, provide banking services and pay interest) because we've decided it's a social good to provide people with savings accounts and incentivize them to use them, but anyone that knows that knows how banks work.

Why do people who don't know how banks work think they get paid interest on their savings?

Well, you're probably going to be very disappointed when you learn how money works in general these days.

Hint: Gold has no more to do with it than any other commodity does. Ditto with petroleum.

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