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Comment by slondr | Hacker News Reader

> Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices?

Yes, because that is how risk works.

> And that my deposit should vanish into thin air?

No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both.

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I think you're wrong. 'risk' is where I invest my money somewhere I can expect to lose some/all of my investment. Placing my money into the likes of a JPM or SVB, etc. should be RISK FREE because a) I am not investing my money and b) To recognise the fact it should be close to risk-free, I receive negligible interest on my deposit.

>No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both.

Why would I do that when I can bank with a too-big-to-fail bank like JP Morgan Chase, Citibank, Wells Fargo, or Bank of America?

If you can, then do that. "Bank with too-big-to-fail bank" is a rational choice that you could make while doing a risk assessment.

Unfortunately, many small companies and first-time founders can't get a business account at one of the big banks. Hence: SVB. I don't think this means we should automatically bail them out, though.

>Unfortunately, many small companies and first-time founders can't get a business account at one of the big banks.

Why? I opened my first business account at Bank of America moments after I created the legal entity.

Opening a business bank account is straightforward. Unless there is a KYC issue, you can do it all online in minutes.

Because you're assuming just as much risk that one of these banks won't lock the entirety of your account for {reasons} while you fight it out with them.

In the case of many founders, especially non-US citizens, those banks won’t open accounts for them.

You're taking a risk with those banks if you exceed the insurance limits, too.

I'm not, because I know the federal regulators have strict requirements for these banks and will bail them out if they did somehow fail for being a "systemically important bank." I'm not qualified to evaluate the soundness of a bank, and neither are the rating agencies (as 2008 showed), so I'm going to go with the banks I know the federal government will backstop.

> so I'm going to go with the banks I know the federal government will backstop.

Sure, there's nothing wrong with that. It's still a nonzero risk, of course.

But it's also not necessary. You don't have to assess the soundness of the bank yourself, really. You can bank with pretty much any random bank and get the same level of safety. You just have to actively manage your risk, is all.

That’s the point?

The point is that everyone should bank with four too-big-to-fail banks and all other banks in the US should be shut down? That's certainly A Take. I thought we wanted to do away with too-big-to-fail banks, not permanently cement them into place.

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