[loonster]

A bank should keep the money secure. Anything >0% loss is unacceptable. They were greedy and had a duration mismatch. Interest rates rise and the value of the longterm bonds go down. The regulators should have stepped in and stopped that. Why didn't they?

No one should be made whole. Looks like the stock holders will have a 0 and bond holders will take a significant cut. Depositors will be safe.

The executives should all be in prison for this. Only have to do this once. The other banks would wisen up and get their act together.

[hnfong]

> A bank should keep the money secure. Anything >0% loss is unacceptable.

You're wrong about this part at least. Borrowing short and lending long is what banks do (among other things). The alternative is either:

- banks asking for 10+ year time deposits to match your 10+ year mortgages , or

- banks only willing to do mortgages that are < 1 year

The risks can be managed somewhat, and SVB *definitely* were too greedy (and stupid), but you're mistaken if you think the other banks are qualitatively different than SVB in their exposures to interest rate risks...

That's why most bank's stocks are down. Most people don't think they will fail, but recent events do highlight that they have a bunch of long term securities that lost value.

[tarsinge]

Dumb question but is just keeping customers funds without investing them (even in bonds) and just collecting fees not a viable business model for banks? Is it a necessity or greed?

[pjc50]

Keep the funds in what?

There's about $2trn in banknotes https://www.uscurrency.gov/life-cycle/data/circulation and from my earlier reading of the FDIC statements there's about $24trn in total US bank deposits. So if you want to have everybody keeping their own individually serialled banknotes that's a non-starter.

You can keep it at the central bank, whether that's "postal banking" or "the deposit window" or "a CBDC", but that seems to be politically unpopular for incomprehensible reasons.

[makomk]

This idea is fairly popular with libertarians and people have tried to set up so-called narrow banks that do this, but the Fed blocked them from doing so because they consider it to be too important that banks invest their deposits and make loans. That is, the non-existence of the kind of bank you're talking about is the direct result of government intervention, and in fact pretty much all this crisis is (the bank failures were caused by the Fed's interest rate policies, banking regulations pushed banks to focus on default risk over duration risk, etc).

[noir_lord]

In that it's theoretically possible of course.

The problem is inflation and the lack of interest rates means that just holding cash is a losing proposition (inflation will eat away at it).

With inflation running at 9%ish percent if you hold 20K for 10 years at 9% inflation, it's real worth at the end will be ~8.5K.

[Ekaros]

Question is level of these fees. If they were to charge let's say 0.5% on any deposit of any scale it might work.

With current levels of normal account fees, likely less so. There is lot of staff and operational expenses even if these were set at minimum.

[TheAlchemist]

What about the CFOs and wealthy individuals that where just bailed out ?

Shouldn't they were in prison (the CFOs, for wealthy individuals - it's just their money) too ? They were fully aware of the 250k$ limit of FDIC insurance.

[sensanaty]

I'm not really qualified to comment on these things so correct me if I'm wrong, but I thought the FDIC insurance was a minimum insurance, meaning that everyone regardless of balance is insured up to 250k and will get that 250k (or whatever they had on the accounts less than 250). In the case of the ones with more than 250k, they'd still be made whole once all the bank's assets are sold/redistributed, right?