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Comment by woeirua | Hacker News Reader

The good news is that the failure of SBNY is probably what convinced them to pull out the stops and make the FDIC guarantee unlimited.

The bad news, is that if your bank fails this week you would get full coverage. If your bank fails next month the FDIC may choose to let you hang out to dry. At this point, anyone who keeps their money at a small bank is a fool. Only store your cash at a large bank. The US govt only cares about systemically important banks.

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> Arbitrary rules teach kids discipline: If every rule made sense, they wouldn't be learning respect for authority, they'd be learning logic.

~ Stephen Colbert

Not true if you have less than $250k at your bank. There is no reason to think FDIC will not honor the $250k insurance limit.

Yeah, unless you're megarich, you as an individual you probably shouldn't have more than that in a bank.

sure you might. like when you buy a home. you could easily have a lot of equity you need to move into a different, also inflated price home. Lets say you bought a 300k house in 2010 and now it's sold for 650k. well now you have at least 400k in cash you need to transfer to your new home somehow. Maybe you stick it in your primary savings account for a few months while you shop. You might not realize you won't have FDIC insurance for those few days or weeks so you get unlucky and lose most of your wealth when your bank fails.

PSA: When you sell a house, you can direct the escrow agent to wire the proceeds to multiple accounts.

Yes, there are rare cases (like, say, <2% of your life) when it would make sense.

I understand your point but why does this have to keep happening and why must we normalize it? If I'm depositing my money in your bank is it not unreasonable to expect you to act responsibly with it?

They bought treasury bills, is that really irresponsible? Of course on Monday morning everyone says they were obviously being dumb not hedging their rate risk, but how many people were saying that before Friday?

They didn't properly hedge the bonds or they didn't anticipate the much spoken rate hikes. That's the irresponsible part. If that's as easy as buying treasury bonds then everyone can be a fund manager.

Indeed. The government passed out money like candy and printed treasury’s to fund it at interests rates the Fed (who they hire) set at record lows. They then put into their own regulations that these are 0 risk assets and banks bought them to pay for depositors. Then the Fed decided to put rates at the highest level in 20 years.

They had too much MBS with average maturity of 6+ years. T bills by definition mature in a year or less. T bills, if they had any, weren't the problem.

https://www.netinterest.co/p/the-demise-of-silicon-valley-ba...

Treasury bonds are not the same as treasury bills. Please please everyone stop commenting “facts” about stuff you’re not familiar with.

they purchased 10 year treasuries and 15-30 year MBS. This is pretty irresponsible, a normal bond manager not yield chasing would have had a decent component allocated to 1-3 year treasuries.

You can literally call up your 401k/403b provider tomorrow and ask for the bond fund/portfolios/allocations available. See if you can find any bond fund with no short-dated maturities.

It's equivalent of having a 100% tech stock portfolio and not hedging sector risk. Maybe it isn't as irresponsible as going 100% into a single stock ticker, but it's still extremely irreponsible

T-bills are short duration (up to 1 year). If they had stuck with T-bills they'd be in better shape today.

SVB reportedly bought longer-duration US Treasury debt which is more sensitive; one source says their portfolio had an average duration of around 5.7 years, up from 4 years a bit over a year ago: http://twitter.com/MacroAlf/status/1634626136364679168

The issue with longer-term debt is that if you need the money now, you can't force the issuer to redeem it before the bond matures - instead, you have to find someone else to buy the bond it from you. And if it's paying half the interest that a new issue would pay, nobody's going to give you face value.

No don’t talk about the elephant in the room (fractional reserve). That is the sacred dogma.

One upside of being big is you get a bailout.

Some random regional bank in Kentucky that fails next year won’t get this treatment.

They won’t need to. They’ll be taken over in orderly course and all depositors will be made whole by the normal acquiring institution. Like the 500 or so banks they’ve done that for in the last 20 years.

Depositors don’t typically lose money in FDIC receivership situations no matter what their balance is.

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