How deposit insurance actually works

Update: 2025-11-06

Description

Patrick McKenzie (patio11) reads his Bits about Money essay on deposit insurance, explaining this critical financial infrastructure, with some thoughts on its performance during 2023. He covers what deposit insurance actually covers (and critically, what it doesn't), how fintech users often misunderstand their exposure to counterparty risk, and the anatomy of bank failures. This is infrastructure you rely on as much as electricity: ubiquitous, critical, hopefully invisible, and worth understanding before it matters again.
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Full transcript available here: www.complexsystemspodcast.com/how-deposit-insurance-actually-works/

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Links:

Bits about Money, https://www.bitsaboutmoney.com/archive/deposit-insurance/

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Timestamps:
(00:00 ) Intro
(03:10 ) The covered peril
(07:07 ) Anatomy of a bank failure
(12:55 ) Keeping your bank hydrated
(19:58 ) Sponsor: Framer
(23:20 ) Orderly bank failures
(28:25 ) The cost of insurance
(30:15 ) The ultimate backstop
(31:48 ) Deposit insurance as ubiquitous infrastructure