Posted on 05/07/2023 4:57:36 PM PDT by SeekAndFind
I'm all for honoring contracts, but in today's age a $250,000 FDIC limit makes no sense for business bank accounts.
We had an FR discussion on this back when SVB first collapsed. I estimated that under a $250,000 FDIC insurance limit, the Ford Motor Company (just one example) would need something like 1,800 different bank accounts just to cover its biweekly payroll.
And then there's the problem of how you sell a home for more than $250,000 when the typical transaction involves between a minimum of three different bank accounts.
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He did praise the quick saving of the bank but later in the question/answer either he, or Charlie Munger, did say there needs to be some consequence for the actions of SVB and that for most depositors the banking industry is fairly opaque. (e.g. crafted financial instruments which are difficult to unwind)
Well, I think the idea would be, because you are only insured to $250,000, you should DAMN WELL, pay attention to the operation of that bank. Sitting back and waiting for a bail out is not, what I would suggest, the answer.
SPJNK.
I agree with that and with the original posters point but merely pointing out that there was a lot more said on the topic throughout the question/answer period.
If a major corporation with tens of thousands of employees has to worry about the stability of its banks, then the entire banking industry will change dramatically. Only large banks will survive. And even then, many major companies will decide to set up their own banks, and their employees will all be forced to do business with the company bank.
It's kind of funny how the same people that complain here on FR about the U.S. banking system getting shrunk down to 4-5 major banks are the same ones who complain that the U.S. government shouldn't bail banks out ... when the refusal to bail out smaller banks is only going to accelerate that trend.
I am not expert (that goes without saying), but I suggest that there COULD be a free market solution. Ford deals with a bank, but also pays an insurance premium that with some large banking/insurance concern that kicks in if the original bank fails. No government fingerprints necessary. The insurer would have all the incentive in the world to keep tabs on the bank in question. Again, not perfect, but preferable to the government’s involvement. At least IMHO...
That’s not an outlandish possibility. In fact, the collapse and near failure of major insurer AIG was one of the things that made the 2008 financial collapse so devastating.
We are discussing some questions here that go right to the core of the stability of our entire financial system.
The world has really passed this old man by.
I certainly have some differences with Warren Buffett, particularly the charities he supports, but in many ways he rejects a lot of ephemeral fads of modernity and embraces wisdom from an older tradition.
It’s kind of funny how the same people that complain here on FR about the U.S. banking system getting shrunk down to 4-5 major banks are the same ones who complain that the U.S. government shouldn’t bail banks out
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Conservatives want to reduce barriers to entry and regulations to have more and better businesses. It’s stupid to suggest that means one wants bailouts.
There used to be banks dedicated to serving businesses.
Agree, but he fails to understand the impact of a lot of tech. Hell, I’m less than half his age and it’s hard for me wrap my arms around some of it.
IIRC-—He has fought the IRS for years over BACK TAXES
“In the United States, AIG is the largest underwriter of commercial and industrial insurance.”
https://en.wikipedia.org/wiki/American_International_Group
The biggest risk of all is an operation run out of Washington, DC.
It can turn $32 trillion of possible value into wallpaper with the aid of just 270 (51 + 218 + 1) people.
The way to deal with risk is auditing and questioning.
Who is your auditing firm?
Please give us copies of your latest FDIC status forms.
“And then there’s the problem of how you sell a home for more than $250,000 when the typical transaction involves between a minimum of three different bank accounts.”
Each of the $250,000 checks may be bad.
Each of the three banks the $250,000 checks are deposited at may be unsound.
When I sold my Reston, VA house I bought stock with the net proceeds.
In Britain, house sales can involve a chain of contingent sales transactions. Sale 1 completes just after Sale 2 completes which is just after Sale 3 completes...
The faster the completed chain is wound up by closes the less actual risk there is.
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