
Wealth Management Products in China (2015) [pdf] - jpelecanos
https://www.rba.gov.au/publications/bulletin/2015/jun/pdf/bu-0615-7.pdf
======
dtrain2017
This screams fraud. Banks in China offer a product which claims a guaranteed
rate of return, yet the deposits are invested in securities, loans, other
risky investments. So I guess its like a bond - I only read the first
paragraph but would love this explained.

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hkmurakami
Question. Do they guarantee a payout (like a bond), but then they themselves
assume the risk of the mix of riskier securities? Or are they claiming a
guarantee but then offloading the risk onto the consumer and making a false
promise?

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bmc7505
Unrelated, but even in the US, the standard deposit insurance "guarantee" is
not exactly guaranteed. If a small insured bank fails, the FDIC can absorb its
losses. If a large bank collapses, they might be able to cover losses, but
only if it is an isolated incident, (like Washington Mutual). However if there
was ever a large run on the banks (like in 1929), they could only renumerate
small a fraction of insured deposits (at most 2% in 2017).

~~~
JumpCrisscross
> _if there was ever a large run on the banks (like in 1929), they could only
> renumerate small a fraction of insured deposits (at most 2% in 2017)_

The FDIC (a) cannot "cram down" [1], (b) has the ability to borrow $500
billion from the U.S. Treasury [2] _and_ (c) is backed by the "full faith and
credit" of the U.S. Government [3]. A decision to "renumerate small a fraction
[ _sic_ ] of insured deposits" would be a political call. It's certainly not a
"could only" scenario.

[1]
[https://en.wikipedia.org/wiki/Cram_down](https://en.wikipedia.org/wiki/Cram_down)

[2]
[https://www.fdic.gov/news/news/press/2009/pr09153.html](https://www.fdic.gov/news/news/press/2009/pr09153.html)

[3]
[https://www.fdic.gov/deposit/deposits/](https://www.fdic.gov/deposit/deposits/)

~~~
bmc7505
(a) What alternative would they have, besides closing the banks? (b) Still
only a small fraction of insured deposits. (c) Contingent on its ability to
govern. How long would that last in such a scenario?

~~~
JumpCrisscross
> _What alternative would they have, besides closing the banks?_

Receivership [0]. Note that if your bank closes, the FDIC still sends you your
money.

> _How long would that last in such a scenario?_

The FDIC has about $7 trillion in insured deposits [1].

In the crisis, between TARP [2] and TALF [3], the federal government printed
$1.5 trillion. (About $1.8 trillion in 2017 dollars [4].) Meanwhile, the Fed
bought $4.5 trillion in assets through its quantitative easing programmes [5].

Adjusting for inflation, we probably saw close to $7 trillion in fiscal and
monetary stimulus.

[0]
[https://www.fdic.gov/about/strategic/strategic/receivership....](https://www.fdic.gov/about/strategic/strategic/receivership.html)

[1]
[https://www.fdic.gov/bank/statistical/stats/2017jun/fdic.pdf](https://www.fdic.gov/bank/statistical/stats/2017jun/fdic.pdf)

[2]
[https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra...](https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Program)

[3] [https://en.m.wikipedia.org/wiki/Term_Asset-
Backed_Securities...](https://en.m.wikipedia.org/wiki/Term_Asset-
Backed_Securities_Loan_Facility)

[4] [https://data.bls.gov/cgi-
bin/cpicalc.pl?cost1=1.50&year1=200...](https://data.bls.gov/cgi-
bin/cpicalc.pl?cost1=1.50&year1=200812&year2=201709)

[5]
[https://en.m.wikipedia.org/wiki/Quantitative_easing](https://en.m.wikipedia.org/wiki/Quantitative_easing)

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downrightmike
Anyone else not trust pdfs?

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hellbreaker
Most government websites still use PDFs to distribute information. This is
also true in Canada.

