https://www.bloomberg.com/opinion/articles/2024-11-25/synapse-still-can-t-find-its-money

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Opinion
Matt Levine, Columnist

Synapse Still Can't Find Its Money

Also UPS impairment, Macy's small package deliveries, AQR TA Delphi
Plus, Tether and Pink Floyd.

November 25, 2024 at 2:31 PM EST
[160x160]
By Matt Levine
Matt Levine is a Bloomberg Opinion columnist. A former investment
banker at Goldman Sachs, he was a mergers and acquisitions lawyer at
Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals
for the 3rd Circuit; and an editor of Dealbreaker.
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When you deposit money at a bank, you expect the bank to give it back
to you. There are two things you might worry about, two sets of risks
that might prevent the bank from giving you back your money. One,
which we talk about a lot around here, and which is pretty central to
the history and theory of banking and bank regulation, is that the
bank might lose the money. Banks do not generally just keep your
money in the vault. They use it to make loans, so there is risk: The
loans might default, or depositors might all demand their money back
at once when the bank does not have a lot of ready cash.

These kinds of risk are very well understood, there is an extensive
literature about them, they're in It's a Wonderful Life, and bank
capital and liquidity regulation and prudential supervision are
designed to minimize the risk that a bank will lose your money by
investing it poorly. And if things do go wrong, there is an extensive
system of government backstops -- the Federal Reserve as a lender of
last resort, the Federal Deposit Insurance Corporation's guarantee of
bank deposits, etc. -- to make sure that depositors will get their
money anyway.

 
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