Pay up, Iceland!

[Azathoth]

That doesn't mean that governments should be responsible for underwriting the risks of private institutions though

[Coito ergo sum]

...
There is no practical way for people who put money into bank accounts to audit the solvency of a bank, or to anticipate the criminal behavior of bank management. A person putting money in a bank account can't be anything other than an innocent investor.
...

Exactly my point. As in many other things, the man or woman in the street simply doesn't have the expertise or the information.

...or access to the information.

Then don't invest in what you do not understand...or at least don't bitch if you lose your investment...and FFS don't expect everyone else to bail you out of your ignorance.

No no. Putting money in a bank account is not an "investment."

And, it's casuistry to suggest that I'm "investing in what I do not understand." I know full well how a bank account works. I don't have any ability as a human being to know or control or influence what the bank does with the money. The extent of ANYONE'S understand of a bank account is that you go to a bank, put money in the bank, and they give you statements reflecting the balance. It's not as if it's like stock investing where you're choosing investment vehicles, equities, etc., and you have to know how the market works.

We can certainly have the system where banks don't have to insure their deposits. That's fine, and we can leave it up to each individual to research the liquidity of the bank, which of course, in a society your talking about would be impossible unless the bank voluntarily tells you its finances. It ought not be compelled, in your world, to disclose anything about its business affairs, right? You can say "show me" and the bank can say "no" and you can then say "I won't put my $500 into your bank if you don't," and all the banks will say "good, we lose money on small accounts anyway..."

In your preferred system, the amount of deposits would be greatly reduced, because people would understand that their life savings is at considerable risk. They'll not take that risk as much as they will now, where they know that at least the money they put in there is insured. What that means is that there will be hundreds of billions of fewer dollars in the banking system and available for investment.

The alternative, what we have now, still gives banks the profits on invested money, but requires a small percentage be paid to cover FDIC insurance. It's kind of like workers compensation for bank accounts. If you're a worker and you get injured on the job, you don't have to spend five years suing your employer hoping they have money to pay for your on the job injury - you file a workers comp claim and the insurance covers your medical care - you can't hit the jackpot with million dollar pain and suffering awards, but you get your injuries and wages covered. The employer pays into the insurance pool, but is insulated from civil lawsuits that could bankrupt the employer. Both sides gain, and both sides sacrifice in certain areas. The same goes for the bank accounts - if you're account is injured, you're insured, and the banks pay into an insurance policy, but they are insulated from thousands of civil suits they'd be saddled with if they lost everybody's money.

[Coito ergo sum]

That doesn't mean that governments should be responsible for underwriting the risks of private institutions though

That, of course, is a public policy decision for the legislature.

[Seth]

...
There is no practical way for people who put money into bank accounts to audit the solvency of a bank, or to anticipate the criminal behavior of bank management. A person putting money in a bank account can't be anything other than an innocent investor.
...

Exactly my point. As in many other things, the man or woman in the street simply doesn't have the expertise or the information.

...or access to the information.

Then don't invest in what you do not understand...or at least don't bitch if you lose your investment...and FFS don't expect everyone else to bail you out of your ignorance.

No no. Putting money in a bank account is not an "investment."

Sure it is, if you expect more money back than you put in.

And, it's casuistry to suggest that I'm "investing in what I do not understand." I know full well how a bank account works.

It was a use of the abstract "you."

I don't have any ability as a human being to know or control or influence what the bank does with the money.

Sure you do. You can deny them the use of your money, or you can require them to guarantee your deposits before allowing them to use the money.

The extent of ANYONE'S understand of a bank account is that you go to a bank, put money in the bank, and they give you statements reflecting the balance.

Speak for yourself. Every bank is required to file disclosures and statements reflecting the bank's allocation of assets, including cash on hand, and where the money is invested. Savvy people check out their bank and know how their bank is using their money.

It's not as if it's like stock investing where you're choosing investment vehicles, equities, etc., and you have to know how the market works.

It's exactly like that. That's what banks do with your money. And because it's your money, it's in your best interests to know what the bank is doing with it and how secure it is. If you choose not to know such things, then you have no room for complaint if the bank goes under and you didn't know it.

We can certainly have the system where banks don't have to insure their deposits. That's fine, and we can leave it up to each individual to research the liquidity of the bank, which of course, in a society your talking about would be impossible unless the bank voluntarily tells you its finances.

They are using your money, so you have every right to demand such information, and if you walk into your bank tomorrow (well, my bank anyway...) you (I) can get a detailed report about the bank and it's investments. They MUST give you this information on demand because you're an investor in the bank.

It ought not be compelled, in your world, to disclose anything about its business affairs, right? You can say "show me" and the bank can say "no" and you can then say "I won't put my $500 into your bank if you don't," and all the banks will say "good, we lose money on small accounts anyway..."

Absolutely correct. In a Libertarian world, your investment in the bank is a contractual matter. They get to use your money in return for abiding by the terms of the contract, including disclosure. If you don't like the provisions, find another bank.

In your preferred system, the amount of deposits would be greatly reduced, because people would understand that their life savings is at considerable risk. They'll not take that risk as much as they will now, where they know that at least the money they put in there is insured. What that means is that there will be hundreds of billions of fewer dollars in the banking system and available for investment.

So? Who needs banks for investment money? Ever hear of "venture capital?"

The alternative, what we have now, still gives banks the profits on invested money, but requires a small percentage be paid to cover FDIC insurance. It's kind of like workers compensation for bank accounts. If you're a worker and you get injured on the job, you don't have to spend five years suing your employer hoping they have money to pay for your on the job injury - you file a workers comp claim and the insurance covers your medical care - you can't hit the jackpot with million dollar pain and suffering awards, but you get your injuries and wages covered. The employer pays into the insurance pool, but is insulated from civil lawsuits that could bankrupt the employer. Both sides gain, and both sides sacrifice in certain areas. The same goes for the bank accounts - if you're account is injured, you're insured, and the banks pay into an insurance policy, but they are insulated from thousands of civil suits they'd be saddled with if they lost everybody's money.

The problem with the FDIC is that the amount paid by the banks doesn't cover the losses of failed banks, and the FDIC has to go to the Federal Reserve and the government to cover the losses. Which means that the taxpayers get screwed in the end, either through inflation from the Fed, or through direct subsidies to pay depositors.

Now, if the banks want to create their own PRIVATE insurance agency, I'm fine with that, because they would pay the premiums out of their profits.

The other, better, free-market solution is for DEPOSITORS to insure their risk by buying a true insurance policy from an independent, private bank insurer. The rates for such insurance would much more accurately reflect the solvency and strength of the individual bank involved, because the insurers would have a profit motive to properly rate and carefully examine and follow the bank's practices, as a condition of offering the insurance. In this way, the risk is properly assigned to those who have assets at risk, not to the taxpayers.

[Gawdzilla Sama]

Sulfuric acid.

[Santa_Claus]

No no. Putting money in a bank account is not an "investment."

Yes it is. The fact that someone does not understand that it is. or wishes otherwise does not change that. It's kinda like Gravity If you want risk free put it in a bank safe deposit box (inflation is not a banking issue) - don't give it to someone to invest / speculate with. Should folk be protected from their own decisions? No. But.......it does make sense to protect the banking system from collapse, and to do that may require guaranteeing deposits. I think the UK scheme was up to £50k - but in practice HMG decided to insure the lot.

I would say the first £10k should be 100% covered by the Govt, 90% of the first £50k and 75% of £100k. Any balance after that joins the q of creditors - with the Govt being the first Creditor to recoup the monies paid out. and if takes 5 years to unravel the bank and payout only 50% to depositers, then so be it. FWIW most folks do understand enough to make decisions on the bank they entrust there money to - but mostly simply can't be arsed. The easiest indicator is a) have I ever heard of this bank before? b) can I spell it and c) why is the interest rate better than elsewhere?......and if you can't answer the last one, then why give them the money?

In addition the Govt should ensure there are "dull" banks (like the old UK Giro Bank) within the financial system so that no matter what happens to the sexy banks folks always have at least one place to put there money. and can be transfered between folks and businesses. Even if the price of that is low or zero interest. Dull always has a place.

I am also in favour of living wills for banks - always good to have a plan in advance of a crisis. And being able to ring fence and liquidate out the sexy parts of a bank before it infects elsewhere (self and other banks) is a good thing. Just won't be popular at the time.

[JimC]

Instead of putting my money in the bank, or as cash under my bed, I sometimes feel I should devote my savings to good, old-fashioned hoarding of non-perishable essentials like gin, sugar and salt, and stash them under my house for when everything goes tits up...

(the list of course is much longer than that, just thought I would get the priority items down first)

[Svartalf]

We will not pay of our own free will! Those banks were private banks and the public should not be forced to pay for loans someone else took.
It was Browns decision to pay everyone back in full when it was not necessary by law and then he used terrorist laws against us which cost us a lot of money

Go screw yourselves

I'd rather screw a pretty girl if that did not bother you, but otherwise, yeah, stick it to the brits, I just hope you did not count too much on joining the EU once you decided to change your mind on that.

[Azathoth]

Seriously, fuck the EU. Their destructive fisheries policy is the last thing that Iceland needs

[Svartalf]

What life must be like in Iceland with no strip clubs....dark and gloomy...empty ATMs and failed banks... no trees....

How's that dried and salted shark meat these days?

We have strip clubs, the strippers just have to have thongs on
It´s no longer dark and gloomy and soon it will be bright the whole day and night.
(I will not mention the failed banks and the lack of trees )

We don´t dry and salt shark meat. That would just be stupid

No, you bury it so it will rot nicely? or how is it you make Hakarl anyway?

[Svartalf]

They cant go back to furs...no mammals to hunt...so they should go to dried cod as the monetary unit.

Actually, the traditional Icelandic currency was lengths of homespun of standardized width.

[Svartalf]

All of the banks should have been left to fail.

Down through the years we've all been well aware of the following caveat:

Please remember the value of your investment can go down as well as up and you may get back less than you invested.

But when the chips were really down it turned out to be meaningless.

We all knew that money left on deposit in a bank was invested by the bank to get a return (if anyone didn't know then ignorance can't be used as an excuse - the onus was on them to find out). They pay out a small amount of taxed interest (say 3%) after making investment and loan interest gains of anything up to 10% and beyond.

If I had £50,000 resting in a bank account and making interest, I have bought in to the banking system and put my money under their control. If the bank fucks up and goes under well I should just accept that my money is gone. Bad luck. It's outrageous that the public, my fellow citizens, many of whom may have no money on deposit, are forced to bail me out and cover my £50,000 private asset.

What's outrageous is that we in Ireland are being forced to pay out for the sins of real investors, who went completely nuts in the property market. Now that was risky investment. Like every other PAYE worker, I'm already paying through the nose for this, even though I had no part in it. As I've already pointed out, this madness was based on cheap external credit, not on the savings of Irish individuals.

Remember the three key variables in investment: Risk, return and liquidity. If I'm getting next to no return for whatever I have on deposit, then it is understood that this is very secure and/or I can withdraw it at any time.

If everyone took such an unforgiving view of the banking system as you do, then I doubt you'd have been able to get the money to fund your business in the first place.

Yeah,n you should sack your government and banninate them to the 6 counties with the rest of the sassenach lovers, and have the bank bailouts repealed .

[Svartalf]

No no. Putting money in a bank account is not an "investment."

Yes it is. The fact that someone does not understand that it is. or wishes otherwise does not change that. It's kinda like Gravity If you want risk free put it in a bank safe deposit box (inflation is not a banking issue) - don't give it to someone to invest / speculate with. Should folk be protected from their own decisions? No. But.......it does make sense to protect the banking system from collapse, and to do that may require guaranteeing deposits. I think the UK scheme was up to £50k - but in practice HMG decided to insure the lot.

I would say the first £10k should be 100% covered by the Govt, 90% of the first £50k and 75% of £100k. Any balance after that joins the q of creditors - with the Govt being the first Creditor to recoup the monies paid out. and if takes 5 years to unravel the bank and payout only 50% to depositers, then so be it. FWIW most folks do understand enough to make decisions on the bank they entrust there money to - but mostly simply can't be arsed. The easiest indicator is a) have I ever heard of this bank before? b) can I spell it and c) why is the interest rate better than elsewhere?......and if you can't answer the last one, then why give them the money?

In addition the Govt should ensure there are "dull" banks (like the old UK Giro Bank) within the financial system so that no matter what happens to the sexy banks folks always have at least one place to put there money. and can be transfered between folks and businesses. Even if the price of that is low or zero interest. Dull always has a place.

I am also in favour of living wills for banks - always good to have a plan in advance of a crisis. And being able to ring fence and liquidate out the sexy parts of a bank before it infects elsewhere (self and other banks) is a good thing. Just won't be popular at the time.

Actually, your standard bank account is NOT an investment, it's a way to store your money without having to hoard it under the mattress, and to access modern means of payment (like cheques and debit cards).

an investment is essentially immobilizing your money to put it in an economic venture in the hopes that the venture will end up profitable. Not what a normal user does when opening a bank account where his wages will go and from which to pay for utility and credit card bills. Even in places where your checking account draws a little interest, it's not an investment, but a contractual remuneration for the fact that the bank gets to invest your money on the stock exchange etc. Depositors in that kind of banking deserve protection from bank failure.

Investing is what you do when you go to a specialized bank, or buy stock products whose returns depend on market performance rather than on contractual rates.

[Sælir]

What life must be like in Iceland with no strip clubs....dark and gloomy...empty ATMs and failed banks... no trees....

How's that dried and salted shark meat these days?

We have strip clubs, the strippers just have to have thongs on
It´s no longer dark and gloomy and soon it will be bright the whole day and night.
(I will not mention the failed banks and the lack of trees )

We don´t dry and salt shark meat. That would just be stupid

No, you bury it so it will rot nicely? or how is it you make Hakarl anyway?

Yes, we bury it and make it rot
It´s quite good actually

[Coito ergo sum]

...

No no. Putting money in a bank account is not an "investment."

Sure it is, if you expect more money back than you put in.

Saving is storing money safely---such as in a bank or money market account---you save for short-term needs such as upcoming expenses or emergencies. Typically, with this kind of “saving”, you earn a low, fixed rate of return and you can withdraw or have accesss to your money, easily.

Investing is taking a risk with a portion of your savings. You can buy stocks and bonds or mutual funds with the hope of realizing higher long-term returns.

And, it's casuistry to suggest that I'm "investing in what I do not understand." I know full well how a bank account works.

It was a use of the abstract "you."

It's casuistry even in the improper usage.

I don't have any ability as a human being to know or control or influence what the bank does with the money.

Sure you do. You can deny them the use of your money, or you can require them to guarantee your deposits before allowing them to use the money.

Not as a practical matter - in real life. A bank couldn't operate on individualized deals from customer to customer.

The extent of ANYONE'S understand of a bank account is that you go to a bank, put money in the bank, and they give you statements reflecting the balance.

Speak for yourself. Every bank is required to file disclosures and statements reflecting the bank's allocation of assets, including cash on hand, and where the money is invested. Savvy people check out their bank and know how their bank is using their money.

LOL - you want to limit banking to the "savvy?" That is, of course, one way to do it. It would result in a dramatic reduction in the amount of money available for banks to use and lend.

Moreover, I do speak for myself. And, as a person who can read an 8K, 10K and 10Q, I can tell you that even the "savvy" are not equipped to make comparative decision based on the regulatory filings made by banks, and the regulatory filings really don't give you the information needed to evaluate the health of the bank. Accounting experts, with access to the underlying assumptive data, can compare one bank with another based on regulatory filings, but even highly "savvy" people without specialized training are just shooting in the dark.

I would love to here your comments on whether this bank is a good bet and financially sound enough to warrant depositing one's money in: https://www.peoples.com/pdf/3Q10_10Q.pdf and https://www.peoples.com/pdf/Revised_Form10K_2009.pdf

Moreover - in your world - why would they even be required to make these complex and expensive disclosures? Shouldn't it be the individual "investor" coming to the bank, talking to the sales representative, holding out his $500 to open up a new checking and savings account, that should leverage that bargaining power and demand that the bank, before the customer will risk his money to get 1.5% interest, fully disclose its finances. The parties would then agree what information would be disclosed.

It's not as if it's like stock investing where you're choosing investment vehicles, equities, etc., and you have to know how the market works.

It's exactly like that.

Isn't. It's not the same thing at all. Stocks are equity interest. Bank accounts aren't.

That's what banks do with your money.

Not necessarily. Very often they make loans.

And because it's your money, it's in your best interests to know what the bank is doing with it and how secure it is.

The money is fungible, and the bank doesn't keep track of the dollar bills you deposit and track their whereabouts. They and you don't know where your specific money went. Moreover, once it's deposited, it's not your money, it's their money. Under any banking agreement for an account, you make a deposit and give up your right - "voluntarily" - to direct the money. It becomes the bank's money, and they give you a conditional promise to repay it with interest.

If you choose not to know such things, then you have no room for complaint if the bank goes under and you didn't know it.

Have you ever had a bank account? The people at the bank that you talk to when you're opening the account don't know "such things." They couldn't tell you even if you asked them. Call the COO and arrange a meeting with their corporate accountants. We'll take a week and sit down and pore over the financials, and backup. Do that for 10 different banks, and then we can get a reasonable assessment of which one is most financially sound.

We can certainly have the system where banks don't have to insure their deposits. That's fine, and we can leave it up to each individual to research the liquidity of the bank, which of course, in a society your talking about would be impossible unless the bank voluntarily tells you its finances.

They are using your money, so you have every right to demand such information,

You can demand anything you want. They have every right not to tell you. That's especially true in your world, where they could simply say that if you want to deposit the money in their account, you give the money to them and they will promise to repay it with interest.

and if you walk into your bank tomorrow (well, my bank anyway...) you (I) can get a detailed report about the bank and it's investments. They MUST give you this information on demand because you're an investor in the bank.

No - they must give you that because the law says they must. That detailed report is a bunch of bullshit, and you would know that if you knew what you were talking about. If you think you really know the health of the bank by looking at what they are required to tell account holders, you are nuts.

It ought not be compelled, in your world, to disclose anything about its business affairs, right? You can say "show me" and the bank can say "no" and you can then say "I won't put my $500 into your bank if you don't," and all the banks will say "good, we lose money on small accounts anyway..."

Absolutely correct. In a Libertarian world, your investment in the bank is a contractual matter.

So, then you'll need to retract your statement above where you say you have a "right" to know x, y or z as an investor. You only have a "right" to know what they agree you have a right know. And, of course, they won't ever agree.

They get to use your money in return for abiding by the terms of the contract, including disclosure. If you don't like the provisions, find another bank.

That is one way to do it, of course. Not the best way to do it, in my opinion. But, there is no inherent or constitutional reason why it ought to be the way you say it is. I prefer to have a system where banks pay for insurance on the money in relatively small accounts to encourage deposits. That way the economy will have more money to use and invest and loan to businesses. The availability of capital is vital to our economy, and without safe bank accounts, people's rate of depositing money would plunge. Most individuals just wouldn't have bank accounts.

With a compromise plan, we have a situation that allows the bank to pay a small amount of interest on insured principal. They can then invest or lend that money and make far more than the 1.5% that we account depositors make. They should make more, because they are taking a risk. We, the depositors, are justified in getting low interest, because we take no risk.

In your preferred system, the amount of deposits would be greatly reduced, because people would understand that their life savings is at considerable risk. They'll not take that risk as much as they will now, where they know that at least the money they put in there is insured. What that means is that there will be hundreds of billions of fewer dollars in the banking system and available for investment.

So? Who needs banks for investment money? Ever hear of "venture capital?"

Yes, I'm sure I'm more familiar with it than you. People with $1,000 in their checking accounts aren't going to invest that money in capital ventures. You need to get millions of depositors, so that there is more money in the system, so that business can use that money.

The alternative, what we have now, still gives banks the profits on invested money, but requires a small percentage be paid to cover FDIC insurance. It's kind of like workers compensation for bank accounts. If you're a worker and you get injured on the job, you don't have to spend five years suing your employer hoping they have money to pay for your on the job injury - you file a workers comp claim and the insurance covers your medical care - you can't hit the jackpot with million dollar pain and suffering awards, but you get your injuries and wages covered. The employer pays into the insurance pool, but is insulated from civil lawsuits that could bankrupt the employer. Both sides gain, and both sides sacrifice in certain areas. The same goes for the bank accounts - if you're account is injured, you're insured, and the banks pay into an insurance policy, but they are insulated from thousands of civil suits they'd be saddled with if they lost everybody's money.

The problem with the FDIC is that the amount paid by the banks doesn't cover the losses of failed banks, and the FDIC has to go to the Federal Reserve and the government to cover the losses. Which means that the taxpayers get screwed in the end, either through inflation from the Fed, or through direct subsidies to pay depositors.

Now, if the banks want to create their own PRIVATE insurance agency, I'm fine with that, because they would pay the premiums out of their profits.

The other, better, free-market solution is for DEPOSITORS to insure their risk by buying a true insurance policy from an independent, private bank insurer. The rates for such insurance would much more accurately reflect the solvency and strength of the individual bank involved, because the insurers would have a profit motive to properly rate and carefully examine and follow the bank's practices, as a condition of offering the insurance. In this way, the risk is properly assigned to those who have assets at risk, not to the taxpayers.

[/quote][/quote]

That is another way to do it.