🐙 THEY Aren't Telling You About Banks & FDIC Insurance
Channel: Stock Docta' Trading
Date: 12/03/2023

#svb #fdic #bailout #fed #shorts 
we'll be discussing the recent bankruptcy of Silicon Valley Bank (SVB) and how it highlights the limitations of FDIC insurance. SVB, the 18th largest commercial bank, has recently gone bankrupt, causing concerns about its impact on the tech industry. However, the real issue lies with the FDIC insurance and its ability to ensure all deposits in the world.

The FDIC, or Federal Deposit Insurance Corporation, is an independent agency created by the US Congress to provide deposit insurance to protect depositors in case a bank fails. The FDIC insurance covers up to $250,000 per depositor, per account type, per bank. This insurance has given depositors a sense of security, but the recent bankruptcy of SVB has highlighted the limitations of this insurance.

Currently, the FDIC has a fund called the Deposit Insurance Fund, which is calculated every quarter and is currently set at $128 billion. This fund is used to pay out depositors when a bank fails. However, the amount of FDIC insured eligible deposits in the world is a staggering $10 trillion. This means that the FDIC has only enough funds to cover a fraction of the total insured deposits.

As a result, if multiple banks were to fail simultaneously, the FDIC would not have sufficient funds to cover all depositors. This could result in bank runs and severe economic consequences. It is important to note that the FDIC has never failed to pay insured deposits, but the increasing gap between the Deposit Insurance Fund and insured deposits is cause for concern.

In the case of SVB, depositors may not receive the full amount of their insured deposits. The FDIC may only cover a portion of the deposits, leaving depositors with losses. This highlights the need for depositors to be aware of the limitations of FDIC insurance and to spread their deposits across multiple banks.

In conclusion, while the bankruptcy of SVB has raised concerns about the tech industry, it is the limitations of FDIC insurance that should be the focus of attention. With the increasing gap between the Deposit Insurance Fund and insured deposits, depositors should be aware of the risks and take steps to protect their deposits.

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