#fdic

[justinspoliticalcorner]

Adam Clark Estes at Vox:

Some people collect coins or stamps. For a time, I collected debit cards. Not stolen ones! Each one of them had my name on them, right below the logo of the latest banking app I’d decided to try out: Venmo, Cash App, Chime, Varo, Current, Acorns. For the better part of a decade, I did all my banking through these apps, enjoying their slick user experience and lack of fees. The problem with every one of them, however, is that they’re not chartered banks. If the company behind the app went bankrupt, the Federal Deposit Insurance Corporation (FDIC) would not necessarily come to my rescue. This disaster scenario was a hypothetical worry when I eventually settled for Chase and its FDIC insurance. For millions of others, it became a reality earlier this year when a company called Synapse collapsed and froze them out of their accounts. Users of Yotta, a popular savings app with a built-in lottery, and other apps that relied on Synapse to help manage their accounts couldn’t access their money for months. Now, as hundreds of thousands of Synapse customers’ dollars remain in limbo, Sens. Elizabeth Warren (D-MA) and Chris Van Hollen (D-MD) are calling for banking reforms, and the FDIC is proposing changes to its rules.

Still, a growing number of people are embracing these financial technology, or fintech, services. More than a third of Gen Z and millennials used a fintech app or a digital bank as their primary checking account, according to a 2023 Cornerstone Advisors study. So some questions are worth asking: Is it a bad idea to use an app like Venmo as your main bank? Are digital banks like Chime trustworthy enough? The answer to both questions is yes. Venmo is not a bank, and using it as your primary checking account comes with some risks. Some fintech companies, like Chime, are just as big as traditional banks and offer some nice perks. Again, because they’re nontraditional, there are risks. “You’re not going to go back to a world where everybody works with a small bank and walks into a branch,” Shamir Karkal, co-founder of Simple, one of the first digital banks. “The future is just going to be more fintech, and I think we all just need to get better at it.”

Neobanks and money transmitters, briefly explained

The term fintech can refer to a lot of things, but when you’re talking about everyday services for everyday people, it typically refers to either neobanks or money transmitters. Chime is a neobank. Venmo is a money transmitter. They’re regulated in different ways, but because most of these companies issue debit cards, many people treat them like checking accounts. Fintech apps are not the same thing as FDIC-insured banks.

Neobanks are fintech companies that offer services like checking accounts in partnership with chartered banks, which are FDIC-insured. Neobanks sometimes enlist intermediaries known as banking-as-a-service, or BaaS, companies, which are not FDIC-insured. Still, you will often see the FDIC logo on neobank websites, just like you see it stuck to the glass doors of many brick-and-mortar banks. That logo instills trust, and thanks to their partnerships, neobanks can claim some FDIC protections. But because they do not have bank charters, these neobanks and BaaS companies are not directly FDIC-insured. Instead, neobank customers can be eligible for something called pass-through deposit insurance coverage.

[...] Money transmitters, also known as money services businesses, are even further removed from the perceived safety of the FDIC. Put bluntly, if you’re keeping all your money in a Venmo or Cash App account, you don’t qualify for FDIC insurance. Money transmitters are not neobanks or banks at all but rather completely different legal entities that are regulated by individual states as well as the Department of the Treasury. There are certain protections provided by these agencies, but FDIC insurance is not one of them. So when an app like Yotta or Chime says on its website that it’s FDIC insured, it’s not a lie, but it’s not necessarily true either. Venmo, to its credit, admits in the fine print of its homepage that its parent company PayPal “is not a bank” and “is not FDIC insured.” To confuse you even more, however, certain PayPal services that enlist a chartered bank partner, like a PayPal Mastercard or savings account, might qualify for FDIC insurance. Again, it depends.

[...] That doesn’t necessarily mean that all neobanks and fintech companies are untrustworthy. In some cases, the sheer size and track record of fintech companies can instill quite a bit of trust. Chime, the largest digital bank with roughly 22 million customers, scored a $25 billion valuation in its latest round of funding and is planning to go public next year. Venmo’s parent company, PayPal, is widely considered safe and trustworthy. And don’t expect Block, the $42 billion company that owns Cash App as well as its own chartered bank, to fail any time soon. The truth is, even if there is some false sense of security, fintech apps offer certain customers features that big banks can’t or won’t. One thing that’s made Chime and many other neobanks so popular, for instance, is that they don’t charge so many fees. That’s a huge boon to young people as well as people without bank accounts. If a fintech app is your only option, then you might not care so much about FDIC insurance.

“If you’re poor in America and you’re banking at Chase or Wells Fargo, you’re going to get overdraft fees, minimum balance fees,” Mikula explained. “So there is a real need that [fintech] companies fulfill as a result of your establishment banks essentially not wanting to bank poor people because it’s difficult to do profitably.” As many as 6 percent of Americans were living without a bank account in 2023, according to Federal Reserve data. That share grows to 23 percent for those making less than $23,000 a year. The unbanked population, which disproportionately comprises Black, Hispanic, and undocumented people, is at a greater risk of falling victim to predatory lending practices, including payday loans. Some fintech companies also offer short-term loans, though they’ve been criticized for being predatory as well.

If you have Venmo, Cash App, Zelle, or any fintech or digital banking app, be aware: don’t use them as your primary checking account.

[backtonormallife]

Project 2025

Agenda 47

Transition 180

Here is a link to the document.

Read it for yourself

[jeromepowell]

Explanation in the tags if you feel so inclined.

[mostlysignssomeportents]

Lifting FDIC insurance caps is a way to get average people to subsidize billionaires - FDIC insurance costs are always passed onto everyday customers.

But let's also be clear about the distributional impact of such a move:  it's a huge cross-subsidy from average Joes to wealthy individuals and businesses.

If FDIC insurance coverage  caps are removed, banks will pay more in insurance premiums. They will pass those premiums through to customers because the market for banking services is less competitive than the market for capital. In particular, the higher costs for increased insurance premiums are likely to flow to the least price-sensitive and most “sticky” customers:  less wealthy individuals.

-Adam Levitin on Credit Slips

[theexodvs]

I wonder how the folks who call marriage and the family "idols" prioritize them in relation to NATO, the FDIC, the American public school system, the establishment clause, the interstate commerce clause, psychiatry, or boomers' retirement funds.

Or whether they're willing to take the Hezekiah option against them the way they do against marriage and the family.

[fuckyeahmarxismleninism]

By Gary Wilson

In the current crisis, the banks hold the government hostage. They demand anything and everything to "bail us  out, or we will take you down with us." As long as capitalism rules, the bankers are not lying when they say this. On March 12, the Federal Reserve, Treasury Department and the Federal Deposit Insurance Corporation unveiled a plan to rescue uninsured depositors, Semafor reports. Only customers with deposits $250,000 and below are insured by the FDIC. But by invoking a “systemic risk exception,” they’ll now be able to cover larger accounts, which make up a much higher percentage of SVB’s deposits than most banks.

[ilivewithintheshadows]

Daddy's gotta be honest kitten. I think my work is gonna be shut down by the FDIC by the end of the summer.

[todaysdocument]

“The guaranteeing of bank deposits by the Federal government will completely restore confidence in banks . . . . Anything less than 100% guarantee will be accepted by the public as only temporary and will not meet the situation.” Russellville, AR, Chamber of Commerce, March 7, 1933.

Record Group 46: Records of the U.S. Senate

Series: Committee Papers of the Committee on Banking, Housing and Urban Affairs and Committee on Banking and Currency

Transcription: 

PATRONS ARE REQUESTED TO FAVOR THE COMPANY BY CRITICISM AND SUGGESTION CONCERNING ITS SERVICE

CLASS OF SERVICE

This is a full-rate Telegram or Cablegram unless its deferred character is indicated by a suitable sign above or preceding the address.

SIGNS

DL - Day Letter

NM - Night Message

NL - Night Letter

LCO - Deferred Cable

NLT - Cable Night Letter

WLT - Week-End Letter

WESTERN UNION

NEWCOMB CARLTON, PRESIDENT

J.C. WILLEVER, FIRST VICE-PRESIDENT

The filing time as shown is the date line on full-rate telegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD TIME.

Received at 708 14th St., N. W. Washington, D. C.

[[ink stamp "1933 MAR 7 PM 4 44"]]

WS158 44 DL XC=RUSSELLVILLE ARK 7 303P

SENATOR JOE T ROBINSON=

THE GUARANTEEING OF BANK DEPOSITS BY THE FEDERAL GOVERNMENT WILL COMPLETELY RESTORE CONFIDENCE IN BANKS AND CAUSE AN UNPRECEDENTED REVIVAL OF BUSINESS STOP ANYTHING LESS THAN HUNDRED PERCENT GUARANTEE WILL BE ACCEPTED BY THE PUBLIC AS ONLY TEMPORARY AND WILL NOT MEET THE SITUATION= RUSSELLVILLE CHAMBER OF COMMERCE.

WESTERN UNION MESSENGERS ARE AVAILABLE FOR THE DELIVERY OF NOTES AND PACKAGES.

[misforgotten2]

US Post Office First Day Covers   1978 - 1984

[larryshapiro]

getting ready for FDIC 2023 in Indianapolis

[reasoningdaily]

[jeromepowell]

It’s been a dramatic couple weeks out here.

[nicklloydnow]

“Big banks including JPMorgan Chase & Co. and PNC Financial Services Group Inc. are vying to buy First Republic Bank in a deal that would follow a government seizure of the troubled lender, according to people familiar with the matter.

A seizure and sale of First Republic by the Federal Deposit Insurance Corp. could come as soon as this weekend, the people said.

The San Francisco-based bank has teetered for weeks following the March 10 failure of fellow Bay Area lender Silicon Valley Bank. The SVB meltdown spurred panicky First Republic customers to pull around $100 billion in deposits in a matter of days.

The stock has lost some 97% of its value since.

(…)

A seizure and sale of First Republic would cap the astonishing collapse of a lender that was, until recently, the envy of finance. With some $233 billion in assets at the end of the first quarter, it would be the second-largest bank to fail in U.S. history.”

“The Federal Deposit Insurance Corp. has asked banks including JPMorgan Chase & Co., PNC Financial Services Group Inc., US Bancorp and Bank of America Corp. to submit final bids for First Republic Bank by Sunday after gauging initial interest earlier in the week, according to people with knowledge of the matter.

The regulator reached out to banks late Thursday seeking indications of interest, including a proposed price and an estimated cost to the agency’s deposit insurance fund. Based on those submissions Friday, the regulator invited some firms to the next step in the bidding process, the people said, asking not to be named discussing the confidential talks.

(…)

JPMorgan is among a small number of giant banks that have already amassed more than 10% of nationwide deposits, making the firm ineligible under US regulations to acquire another deposit-taking institution. Authorities would have to make an exception to allow the country’s largest bank to get even bigger.”

[businessbigwigs]

First Republic Bank Bailout

First Republic Bank Bailout

First Republic Bank will be getting a $30 billion rescue package from other major banks, after two other major banks failed this week. First Republic Bank is based in San Francisco, and serves mostly venture capital-backed companies and tech startups. Before this week, it had deposits totaling over $175 billion. But like many other similar banks, it has recently seen a major run of withdrawals.…

[paulthepoke]

50% Potential Loss to the Great Triumvirate: Stocks, Bonds, and Real Estate

Proverbs 22:7 The rich rules over the poor, and the borrower is the slave of the lender. Proverbs 22:16 Whoever oppresses the poor to increase his own wealth, or gives to the rich, will only come to poverty. Michael Douville took the time to talk with President of Pento Portfolio Strategies, Michael Pento. For those who are interested in a deep discussion about bonds, debt, and lending. How…