Can we really have UNIVERSAL Banking Insurance?

You’ve probably heard of the bank failures in the news over the past few weeks. There have been a few and there are worries that the list could continue to grow. In March 2023 alone, so far (since we are still in March) the following banks have failed:

  • Silvergate Bank
  • Silicon Valley Bank
  • Signature Bank

Though bank failures may seem rare to you … they happen more often than you may think.

In the wake of the Great Recession, it was typical to see dozens—if not hundreds—of bank failures each year. This slowed significantly from 2015 to 2020, when the U.S. saw an average of fewer than five bank failures per year. Zero banks failed in both 2021 and 2022.

Bank collapses were similarly uncommon in the early 2000s. From 2001 to 2007, the U.S. saw an average of just 3.57 bank failures per year.

Forbes March 15, 2023

This took a sharp turn after the U.S. declared a recession in December 2007. From 2008 to 2012, bank failures shot up to an average of 93 per year. Of the 565 bank failures from 2000 to 2023, 465—or 82%—occurred from 2008 to 2012. Bank failures hit a peak in 2010 at 157 in one year—more than double the number of bank failures we’ve seen in the last 10 years combined.

What is Universal Banking Insurance all about?

Janet Yellen, Head of US Treasury Department, in trying to make people comfortable is calling for Universal Insurance from the FDIC. Many Democrats and Republicans agree. However, one group – the conservative Republican House Freedom Caucus opposes expanding deposit guarantees beyond the FDIC’s current $250,000 limit — a major roadblock to swift action to stem a deeper crisis. I tend to agree with this group and if you read further you may understand why.

Currently the FDIC (Federal Depositors Insurance Corporation) insurance depositors accounts up to $250,000 per account. So, if Jerry Nix had $1,000,000 in a bank in one account the most that would be insured against bank failure would be $250,000 and $750,000 would not be insured. If I wanted the Million Dollars to be insured I’d have to have it in four separate accounts under four different depositors names. For Example:

  • Jerry Nix – $250,000
  • Nix and Company – $250,000
  • Freewavemaker, LLC – $250,000
  • My Spouse – $250,000

Now Ms. Yellen wants it all insured regardless of the amount you have in the bank. So, if you have $1,000,000 in one account or $100,000,000 in one account at one bank it would be insured.

Why this may not work:

US Banks Total Deposits is at a current level of 19.36 Trillion Dollars, down from 19.56 Trillion Dollars last quarter and up from 19.17 Trillion dollars one year ago. This is a change of -1.05% from last quarter and 0.99% from one year ago.

Now let’s look at the FDIC:

Deposit insurance is one of the significant benefits of having an account at an FDIC-insured bank—it’s how the FDIC protects your money in the unlikely event of a bank failure. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

By the end of 2022, the FDIC reported that its Deposit Insurance Fund had a balance of $128 billion—less than half of the $262 billion that might be needed, based on insuring accounts up to $250,000. If there is only about half what is needed the question is … Can the FDIC deplete it’s total funds. The answer is “it is unlikely but certainly not impossible.

I found an article at that was written by Brian Cheung on November 20, 2018. In this article he said …

“Ten years after the financial crisis, the Federal Deposit Insurance Corporation has finally filled its reserve of cash set aside to address bank failures.”

“The Federal Deposit Insurance Corporation, which insures up to $250,000 for each depositor, said Tuesday that it now has enough cash on hand to cover 1.36% of all the FDIC-insured deposits in the U.S. banking system, above the 1.35% mandated by the post-crisis Dodd-Frank regulatory law. The FDIC said its insured deposits reached $7.4 trillion as of the end of September, meaning that its Deposit Insurance Fund has about $100.2 billion. On a quarter-over-quarter basis, the fund increased by $2.6 billion.”

So here’s the question folks:

If there is 19.36 Trillion Dollars in deposits in American Banks and the insurning organization (the FDIC) has $128 billion in reserve how can the total amount be insured with so called UNIVERSAL INSURANCE. I mean after all $19.36 Trillion is 151.25 times $128 Billion. This means the FDIC has on deposit about $0.007 for every dollar deposited in U. S. Banks.

Insuring it all is simply ridiculous … unless of course the government is going to add another tax to the 150,000,000 tax payers or print up more money. In either case they will be doing nothing but making inflation higher than what it is now.

I’d like to know your thoughts and feelings about this issue.

Jerry Nix | FreeWaveMaker, LLC

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