Bankeration

1/ @FDICgov deposit insurance reform is back on the table. As I said last year, we should seriously consider passing the cost of enhanced coverage to the clients who actually use it.

Warsh clears a hurdle, FedNow eyes cross-border payments, #DeFi takes a $13B hit — all in a 5-minute read. open.substack.com/pub/bankeratio… #banking #bankingnews #financenews

@austincampbell Tip of the iceberg. “Deep pockets” status is a double edged sword, and the plaintiffs bar is quick to hop on it.

Unfortunately becoming even more timely with the frequency of hacks… Crypto is about to have a high speed reckoning with these issues, and if you don’t already know your answer, you have a problem.

Earnings land, Fed drama continues, a mythically dangerous AI doesn’t launch, fraud, fraud, and more fraud — all in a 5-minute read. open.substack.com/pub/bankeratio… #banking #bankingnews #financenews

@FDICgov 7/ If deposit insurance reform is coming anyway, we should think carefully about how to preserve market discipline while improving stability. Passing enhanced coverage costs to the depositors who use it may be one way to strike that balance.

1/ @FDICgov deposit insurance reform is back on the table. As I said last year, we should seriously consider passing the cost of enhanced coverage to the clients who actually use it.

@FDICgov 6/ Some clients will balk at the cost. And some banks will offset it by offering higher rates on interest-bearing deposits because we no longer have Reg Q to prevent it. But NIM compression at one bank is still far less costly than an avoidable bank failure.

@FDICgov 5/ Second: it could slow contagion-driven runs. If depositors already have the option to secure additional coverage, panic withdrawals triggered purely by system-wide fear may become less likely.

@FDICgov 4/ First: it might a market signal. If sophisticated clients start paying for enhanced insurance at a specific bank, that behavior could become a leading indicator that the “smart money” has concerns about that bank’s soundness.

@FDICgov 3/ One option: allow depositors to opt into enhanced coverage and pay for it. This creates a negative incentive that could actually improve the system in a few important ways.

@FDICgov 2/ FDIC insurance was never intended to be a blanket surety for all deposits. Large depositors were supposed to play a role in the system by vetting the banks where they place their funds. In fairness, it's become more difficult over the years, but that discipline has value.

Deposit insurance reform returns, a crypto yield compromise falters, prediction markets come under fire, and the Financial Stability Oversight Council lowers the bar — all in a 5-minute read. #banking" target="_blank" rel="nofollow noopener">open.substack.com/pub/bankeratio… #bankingnews #financenews

@TheStalwart Blank Street was jam packed with winter coats

It’s the animal weekend in NYC where everyone you see outside will be underdressed because they’re delusional about how cold it still is.

@ReadThinkTweet2 @MurrayHillGuy1 lol. Correct. I try to forget the east side of 3rd between 33rd & 34th exists. Except for Romano’s Pizzeria. That place is essential.

@bankeration @MurrayHillGuy1 Aren’t Murray Hill bros hanging out in Kips Bay 3d ave bars/restaurants anyway? They are definitely not pushing the swings at a playground in St. Vartan park 😂

NYC Area Tier List S Tier: Murray Hill West Village SoHo Williamsburg A Tier: Lower East Side East Village Meatpacking District Flatiron Greenpoint Astoria B Tier: Upper East Side Upper West Side Bushwick Long Island City Park Slope DUMBO Gramercy Fidi C Tier: Kips Bay Hell’s Kitchen Chelsea Harlem Bed-Stuy Forest Hills D Tier: Midtown Financial District Red Hook Sunset Park Jackson Heights Bronx Little Italy F Tier: Times Square Penn Station Area Roosevelt Island Brownsville East New York Staten Island

@ReadThinkTweet2 @MurrayHillGuy1 The border between Murray Hill & Kips Bay is 34th St. West border of Kips Bay is 3rd Ave if you’re talking to an old timer, and Park if you’ve arrived in the last 20 years.

@MurrayHillGuy1 Isn’t Kips Bay literally next to Murray Hill? There is no “border” 😂 also, east village has been going downhill. Where is Alphabet City in your rankings? 😬😆

@debt_serious I don’t mind the total count. Competition is good. But we could probably have good competition and better services at 2,000 banks. And yeah - a PE owned bank is scary. I wouldn’t mind seeing a test balloon go up. Just one. With the fire hoses up & ready when it all goes wrong.

@debt_serious Well, they had to do something since they told the GSIBs to drop dead if they even think about acquiring a failed bank. Mind you, JPM could ingest a failed bank in a matter of weeks. Systems, people, branding - all of it. But why would we want that? tinyurl.com/NYCBrout

As a pro-PE guy, this is a really dumb idea! What can possibly go wrong?

@mikulaja @DanAwrey If you inexplicably have time to read a decade+ old law school presentation about the .Bank domain, there’s a whole section about the idea that diminished overall trust in financial services could lead to bank runs. open.substack.com/pub/bankeratio…. Just scroll to the pic of a bank run.

@mikulaja @DanAwrey I firmly believe that the SVB, SBNY, and First Republic bank runs were influenced by people who had bad experiences with crypto exchange failures (FTX, Celcius, Voyager). I have no empirical evidence to back this up, but I’m really hoping someone will research it one day.

This: @DanAwrey in his new paper explains how a seemingly idiosyncratic failure like Synapse "can chip away at public confidence and trust in financial institutions and the wider financial system" --

@JillCastilla 3/ That’s the thing about bank runs & FDIC insurance. Imperfect information, clients who aren’t financiers. But they understand FDIC insurance, and it gives everyone (clients, regulators, banks, acquirers) time to work things out in a cost effective way.

@JillCastilla 1/ I’m not sure the payroll example just applies to SVB, though. The argument I had with that law professor was in 2015, not post 2023 (and entirely theoretical). But anecdotally, I had a small NFP move $50k out of Signature on 3/11/23 because of the payroll issues at SVB.

Can someone explain to me why anyone would maintain millions in non-interest bearing accounts?

@JillCastilla 2/ That NFP had less $250k, but couldn’t predict the timing of grants. Their payroll processor also banked at Signature. We were being cautious, but if things went wrong, they needed to pay staff. They didn’t know how the payroll firm managed the funds, or what would happen. .