Quite a few supersavers have asked the question – can banks just take your money? The answer is it depends. Bank Bail In vs Bail Out 2023 – this video – will address that question & more, including:
1. What’s the difference between a bank bail in vs bail out
2. How to protect your money if a bail-in does happen (because it’s easier to do this than you might think)
3. What role the FDIC (Federal Deposit Insurance Corporation) plays in this context
4. What happened in the last bail-in
I’ll also talk briefly about the AIG bail out, the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 & the Cyprus bank bail in of 2013.
SOURCES:
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In recent years, there has been much discussion about whether or not banks can just take your money. The answer to this question is not straightforward, as it depends on a variety of factors. In this article, we will explore the concept of bank bail-ins versus bail-outs, and discuss how they can affect your funds.
First, let’s define what we mean by bail-in and bail-out. A bail-in is when a bank turns to its shareholders and creditors for financial assistance in times of trouble. This can involve converting the bank’s debt into equity or other forms of restructuring, which can result in losses for some investors. On the other hand, a bail-out is when a government or other entity steps in to provide financial assistance to a struggling bank, which can involve using taxpayer money to prop up the bank.
One of the main arguments against bail-outs is that they can create moral hazard, which means that banks may take on more risk knowing that the government will step in if they run into trouble. Bail-ins, on the other hand, are seen as a way to discourage this behavior by making investors bear some of the losses if the bank fails.
So, can banks just take your money in a bail-in scenario? The short answer is yes, but only if you are a creditor to the bank. This means that if you have a bond or other form of debt with the bank, you could potentially lose some or all of your investment in a bail-in. However, if you are a depositor with the bank, your funds are typically protected by deposit insurance, which means that the government will reimburse you for up to a certain amount if the bank fails.
It’s worth noting that deposit insurance schemes vary from country to country, and some may not offer the same level of protection as others. In the United States, for example, the Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account, per ownership category. In the European Union, deposit insurance varies by country, but typically covers deposits up to €100,000.
Another factor to consider is whether or not you hold funds in a bank that is too big to fail. These are banks that are deemed so large and interconnected that their failure could have significant impacts on the broader financial system. In a bail-in scenario involving a too-big-to-fail bank, there may be more far-reaching consequences. This is why some argue that these banks should be subjected to stricter regulations and oversight to prevent them from taking on excessive risk in the first place.
In conclusion, the answer to the question of whether or not banks can just take your money is not a simple one. It depends on a variety of factors, including whether or not you are a creditor or depositor with the bank, the level of deposit insurance in your country, and whether or not the bank is too big to fail. While bail-ins are seen as a way to prevent moral hazard and make investors bear some of the losses in the event of a bank failure, they can still have significant impacts on individuals’ finances. As always, it’s important to be aware of the risks and potential consequences of investing and banking activities.
Jennifer my bank closed my bank account with no explanation and siezed my funds including my payroll check can they do that?
Wouldn’t this just mean everyone with more than 250k will wise up and multiply accounts and make so there is little to no available bail in money? This brings us back to bail outs, which seems smarter either way, because people will still do bank runs and trust the institutions less.
But the FDIC only has $.03 on the dollar, correct? So how can we depend on the FDIC to get our money back?
There should have been a Bail In in Silicon Valley Bank's case. But rich customers like Gavin Newsom and tech companies pressured the feds to bail them out. It's all politics. The feds should have just let SVB fail for its bad management.
Learn a lot about Bail in and thank you very much
What happens if the collapse in the banking system causes losses that are greater than assets the FDIC is holding.
Thank you for sharing.
If only they followed the law and didn't bailout rich tech executive deposits over $250K. Sighhhh
Why wasn't a bail-in used for the last couple of bank failures?
Banks stealing 20% of your savings is a terrible Idea in America. Anyone that tried to run in the last 2 week knew this idea. This may work in Europe but not Swiserland for the same reason it won't be safe to try in the USA.
this is why i just trust the banks with my debt 😉
So let's say you have a million you want to use for business expansion. You want to invest it in your business instead a of a bank that cannot manage itself. so you go to get your money out. So maybe the concept of a bail-
in was part of SVB's liquidity crunch.
Did congress raise the debt ceiling?
Stop sending taxpayer money to Ukraine.
Thank you. I watched 2 vids before this and all they did was try to scare the feces outta me.
Thanks Jenn…. you are someone i can trust 🙂
Does the fdic actually have enough money to cover all deposits if numerous banks failed??? I don't believe they do.
Bail -In, more money to enjoy by Woke Bankers and their Politician Friends.
If I have multiple money market accounts with 250k in each are they considered each separate accounts or lump into 1 account category
Very thorough and careful analysis into this topic. Thank you.
Great info! Q: so with all this said..if you were gonna buy a cd at a bank etc, should you buy it through an institution like Fidelity? Just thinking this could give "2" levels of protection.. Thx
silicon valley bank failure March 10, 2023. We might experience some bail in in 2023.
What happens to FDIC coverage in a case of joint account ownership if one of the account owners dies?
Can the federal government use employee savings in the Thrift Savings Plan as part of a potential bail in? Only that above 250k, or all of it?
Just what l wanted shares in a failing bank.I' m scared to ask FDIC for further information.
400000 in a joint account. Is that 250000 per account or depositor?
Thank you.
Thank you very much for these valuable informations .
you know FDIC only has 1% in reserve so keeping deposits under $250K is still risky if you ask me.
I read that a failing bank can convert deposits to equities and then the FDIC would not cover them because they do not cover securities. Are you certain that this can not happen?
Hi Jennifer, I have 1.5 million at City National, each in my name with a different beneficiaries, and was told by banker that each is protected up to $250,000. Are they each covered even though in same bank? Also $700,000 in Treasuries in my name alone. Is there a limit on protection/insurance on Treasuries?
Thank you for your help, glad I found your straightforward program/info. Ino longer watch the other financial programs.
How quickly does the FDIC pay the insurance to the depositor in the event of a Depression? I hear the FDIC can take as long as they want to repay. What about people who say that they have missing money from their accounts, can they place a claim for the missing money with the FDIC?
Thanks for the video. I read up on this exact thing a few weeks ago, But it did not give me enough confidence to buy another treasury bill. Are treasury bill considered a type of derivatives ? Are treasury bills considered bonds?
Just a clarification, the 250k limit is per beneficiary, not depositor. Appreciate ya
Interesting discussion, what if FDIC does not have enough funds to cover a failure? i presume they will print more money to pay the damage causing inflation. I am assuming stock accounts are safe here, is there a limit on brokerage accounts where thy may not be protected?
Deeper dive
Ty