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Comment by mdorazio | Hacker News Reader

I'd really like to know where people are withdrawing their money from these banks to. They're not taking suitcases of cash, so it must be flowing to some other financial institutions. Is it going to traditional big banks (BofA, Wells, Chase, etc.)?

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Yes -- all the people I know withdrawing from small banks are going to Chase or Morgan Stanley. These largest banks have to mark-to-market their losses and have a lot of cash (short duration) assets, and are literally too big to fail.

Confusingly, the two banks you named are JP Morgan Chase, and Morgan Stanley. JP Morgan Chase is the biggest bank there is, but Morgan Stanley is far smaller (but still ginormious) and doesn't rank in the top 10 banks. The top 3 banks are JP Morgan Chase, Bank of America, and Citigroup.

https://www.insiderintelligence.com/insights/largest-banks-u...

Morgan Stanley is for wealth management. Chase for retail.

Within JPM Chase, the "JP Morgan" or "JP Morgan Private Bank" brand is used for (V)HNWI banking and the "Chase" brand is for retail (although Chase does have a Chase Private Client arm for almost-HNWIs). Due to the nature of catering to VHNWIs, "JP Morgan" of course offers wealth management services.

Morgan Stanley is a completely different company with no (current) ties to JPMC.

The reason JPMC and M-S share the name "Morgan" is because the investment and retail sides of the bank were split during the Great Depression due to Glass-Steagall, almost 100 years ago.

And, more importantly, are national banks regulated by the occ so they can't do the same kinds of risky things that svb & co can do. (They can do other risky things that they come up with historically, especially pre dodd-frank, but not this)

idk how many companies are doing this right now, but recurring investment on 4 week T-bills are safe, can absorb arbitrary amounts of cash, and yield much more than the large banks. But it can take a bit to set up a TreasuryDirect account.

Agree. Brokerage accounts that sweep to US treasury money market are also safe.

Everyone and their mother aping into T-bills will also have the effect of lowering the rates on Treasuries, making 1.5% bonds a reasonable choice again.

I’m thinking our diversified stock portfolio is safe (in that the number of shares we hold should not change, and it’ll go back up before we need the money decades from now).

I’m hoping that’s not naive.

I’m curious about Wealthfront’s strategy of spreading savings across many partner banks to get $2M in FDIC insurance per account though.

I can't speak to Wealthfront specifically, but what you're describing with them is very commonly called a sweeps account. They are explicitly understood under FDIC's rules as automated balance accounts.

Where you can run afoul is if you personally have accounts at the same banks that your sweep accounts use. And you might not even know it. E.g., Mercury isn't a bank: they use Evolve Bank and Choice Financial Group. So if you also had an account at Evolve bank, you're capped at 250k across the total of both accounts.

Note that the limit is $250K per person per ownership category per bank, so if your sweep account is in a different category (single vs joint) than your direct account, your ownership in both is insured up to $250K.

More details here: https://www.fdic.gov/resources/deposit-insurance/brochures/i...

Big 4 and TD

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