Where do these massive outflows of customer funds go? Do these customers see the risk of collapse before everybody else and move the money to another bank, or.. ?
But for me personally, I’ve been moving cash to US Treasury bonds, and based on recent bond prices, so have others. Short term treasuries were nearing a 5.1% yield as of early last week, and now are below 5% due to demand.
Last fall, I moved cash to HYSA accounts for a higher yield, because my bank was still paying 0.05% interest, presumably because they were loaded with low-yield treasuries and mortgage-backed securities.
In general, a bank is not a great place to park tons of money, at least that’s what I’ve learned. I’m tired of getting screwed by them. What the media calls “faith in the banking system” I call getting bent over. Of course there are valid uses for banks, especially in business. But I’m done parking large amounts of cash there.
[0] https://www.reuters.com/business/finance/jpmorgan-other-big-...
If you hold a large amount of cash in a low-yielding bank account, you not only get less yield but are also exposed to the possibility of bank failure (which is itself increased by the increase in treasury yields).
How short term are we talking about?
Yes republicans in Congress will try to force a crisis, no it won't actually mean government bonds become worthless.
If you are holding 10 year treasuries and were planning on selling them on the secondary market in July, yeah that could be very bad.
I’m not sure what relevance you think the military has here in this situation.
The bad part, of course, is they likely won't do that until we've already done some damage to our credibility.
B) It wouldn’t matter anyway you still own the shares of stocks or the bonds. They don’t magically disappear if the entity fails.
C) Additionally there’s SIPC
They don't disappear, but how can you get them in a hurry if your custodian fails?
Sure its horrible to use. But it does the job, and is directly part of US Treasury auctions, so the prices are provably fair.
Brokerages will skim off a bit off the top when they sell you a treasury. In contrast, TreasuryDirect is direct-from-auction, with the fairest prices possible.
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Besides, its not like a notarized snail-mail form is that hard to accomplish. Back in the day, that was the only way to get any official business done.
Your local bank probably has a notary on hand to sign the appropriate form. If not, look up your Yellow Pages for the nearest notary.
My Yellow what?
Yellow Pages is the local business directory.
If you're one of todays 10000, congrats!
I've been trying to open treasury account for last 2-3 months. Having a notarized form is such a big blocker if you have a 9-5 day job.
The reward of getting few % higher return is not enough to figure out notary for me.
I personally go to the bank somewhat regularly to pick up $5 and $1 bills. It wasn't that hard for me to have a notary form also signed for Treasury Direct access.
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Besides, there's a chance that you can get everything done online with Treasury Direct. It just so happened that there was some kind of issue that required me to send in a notarized form proving my identity and such.
But using a notary is kind of basic "adulting" skills. There are other government forms that require a notary. (Passports and such).
Can't bonds like these just be hold in custody at the bank, like stocks? They're property title no? Should my bank in the EU go bust, AFAIK, my stocks are mine. Isn't that the case for short-term US treasuries?
As for physical certificates, didn't the entire world move to digital certificates about 20 years ago? I remember my family having those old physical certificates where you'd cut some pieces of the paper out of them and then you'd go at the bank to get your dividends. And there wasn't much security: you stole these and they were literally yours, with nobody who could verify who they belonged to. These physical "bearer" certificates have been the plot of a great many movies but I think it's now (mostly?) a thing of the past?
Supposing whatever caused your bank/broker/custodian to go bust was also causing the value of your bonds/stocks/whatever to drop and you wanted to sell asap. How fast do you think you could do that?