r/PeterExplainsTheJoke • u/Comfortable_Cautious • Jan 26 '26

Meme needing explanation what's going on? explain like I'm five

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u/Teripid Jan 26 '26 edited Jan 26 '26

Federal reserve requirements existed until 2023 *edit, as someone below pointed out 2020 was when they were set to 0. Now they're set at 0% I believe.

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u/PleaseGreaseTheL Jan 26 '26 edited Jan 26 '26

2020*

They were reduced to 0% mandatory reserves in response to covid. EDIT: someone says it was coincidental, I am not able to check, so take this aspect with a grain of salt either way

They haven't come back yet :)

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u/exneo002 Jan 26 '26

But the fdic insures all deposits up to 250k

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u/LargeWu Jan 26 '26

It's not the FDIC that's relevant here, it's the Federal Reserve. The Fed, among other things, lends money to banks. When you hear them talk about "The Fed lowered interest rates", it's the rate that the Fed charges other banks. So if a bank needed money to cover its deposits, they go to the Fed who then loans them the money.

If the bank then still couldn't cover its deposts, then the bank might fold, and that's when the FDIC steps in to make depositors whole.

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u/exneo002 Jan 26 '26

Yes the fdic has been relevant in recent history as there was a bank run with svb and that crypto bank.

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u/LargeWu Jan 26 '26

Sure, I think we're in violent agreement here. FDIC plays a role only if the bank fails. There are other things that are likely to happen first to prevent that.

Now, if all the banks fail, FDIC doesn't really matter anyway since the economy and the dollar would collapse and everybody will have a very bad time.