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Comment by dom96 | Hacker News Reader

So right now all I have on Schwab is some investments (i.e. no cash). In the event of a bank run it's only cash that is at risk, right?

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Yes, your stocks/shares should be fine (I’m unwilling to guarantee anything for anyone), unless they were a total fraud like Bernie Madoff that didn’t actually invest your money as they said.

The cash in your brokerage account would be covered by sipc, not fdic.

Sipc does have its limits for what it guarantees, I guess anything over that would be based on recoveries in the event of a default:

https://www.firstrepublic.com/insights-education/sipc-vs-fdi...

Schwabs checking accounts are FDIC insured up to $250K. But to be clear a bank run on Schwab isn't happening. They have 7.13 trillion USD in Assets Under Management. And I am certain it isn't all in low-yield bonds.

Most of their AUM is actual security holdings by investors, and should be held 1:1. They can’t dip into that to cover losses elsewhere.

The question is where they’re investing the float.

Investments of float accounts for a big proportion of brokerage profits (along with payment for order flow):

> 57% of Schwab’s revenues are from net interest. The firm could literally give away every other service; discount the mutual fund fees to zero, do away with commissions, etc etc, and they would still be profitable.

> Schwab isn’t even the leader among discount brokerages in dependence on net interest. That would be E*TRADE, at about 67% of revenues. Interactive Brokers makes 49% and TD Ameritrade 51% in the segment.

https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

Stock trading commissions in USA for a while have basically been a scam and it’s only because Robinhood came along that that source of revenue is gone to $0. That might result in more risk-taking on the float side.

The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash.

$250k per-person.

Yes, only cash. You're fine.

Schwab is not going under. Feds would never allow it. This is an overreaction, and honestly I'd start thinking about buying Schwab stock

I bought at 54 this morning with the same thought, Ironically from my Schwab float account. Im wondering if I should also top up my FDIC checking account to add liquidity and back my stock play (as if these drops in the bucket matter).

Depends on the fine print. Usually, you allow brokers to lend your securities to others. If your broker goes belly up, your shares might have been lent and resold to others. You're now a creditor, and you'll share in the losses of the firm.

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