Is It Time For Public Checking Accounts at the Fed?
Odd Lots
Bloomberg
4.4 • 1.6K Ratings
🗓️ 23 March 2023
⏱️ 45 minutes
🧾️ Download transcript
Summary
When Silicon Valley Bank failed, the government stepped in and guaranteed that all accounts — even those well above the FDIC threshold for deposit insurance — would be made whole. So now people are wondering whether all accounts at every bank are implicitly guaranteed, regardless of their size. But if they are, then what is the point of private, for-profit retail banking? On this episode of the podcast, we speak with Saule Omarova, a professor at Cornell Law School. She had been nominated by President Biden to head the Office of the Comptroller of the Currency, but was forced to withdraw due to fierce opposition from the banking lobby. That opposition was based, in part, on her endorsement of public checking accounts at the Federal Reserve. But what was a seemingly "out there" view a year ago, is now firmly within the Overton Window of political possibilities. On this episode, we discuss the SVB disaster, what it means for banking, and the case for a public option.
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| 0:30.0 | Hello and welcome to another episode of the odd lot's podcast. I'm Joe Wyzenthal and I'm Tracy all the way so Tracy |
| 0:47.3 | There's still tons of dimensions potentially to explore so much with regard to the Silicon Valley bank collapse |
| 0:55.4 | But one of the sort of simple questions that a lot of people are asking is from here on out |
| 1:00.1 | Do we just assume that every deposit in a bank is insured even if |
| 1:04.9 | Officially they only promise up to 250k. Yeah, well, I mean that was kind of the implicit takeaway from the weekend |
| 1:13.9 | Announcement and I know we spoke with Dan Davies and he made the point that historically it is rare for |
| 1:21.3 | Depositors in modern financial times to lose a bunch of their money because normally bond holders and equity holders lose all their money |
| 1:29.0 | When a bank fails and some of that gets taken away to pay |
| 1:32.8 | The deposit holders because deposits have a seniority over bonds and equity |
| 1:38.7 | But I still think this is a pretty big change |
| 1:43.4 | It feels very major or at a minimum it feels like the implicit has been made explicit in a way that's before because |
| 1:51.0 | Yeah, maybe in the end even without any intervention |
| 1:54.7 | SVB's depositors may have gotten whole |
| 1:57.0 | We don't know that there was no fire sale or anything like that |
| 2:00.5 | They just announced everyone is getting their money back signature bank too |
| 2:04.9 | And then that raises a second question |
| 2:07.2 | Will if depositors are really always implicitly or explicitly guaranteed by the government |
| 2:12.7 | What is the point of having like private retail banking for profit retail banking? |
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