Comment by icecap12 | Hacker News Reader

Comment by icecap12 | Hacker News Reader

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There are multiple places. For sure other banks. JPM and other “too-big-to-fail” banks received billions of dollars in deposit inflows over the last few days[0].

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-...

How are you holding those bonds? Are you getting physical certificates and putting them in a safe/safety deposit box? If they're held electronically in a custody account at a bank that goes bust then I'm not sure you will be much better off.

Not the OP, but I assume they are holding them in TreasuryDirect.gov.

Very unlikely, TreasuryDirect is so horrible to use, only if you must like I-Bonds. You just go into your brokerage and buy them on the secondary or even through auctions. TD Ameritrade and Vanguard brokerage accounts make this extremely easy. You can also sell your bonds whenever you want instead of waiting til maturity this way.

> TreasuryDirect is so horrible to use

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.

Clearly you're living in different world.

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 just checked Google, and there's a bunch of online Notaries. So I really don't expect anyone to trip up over this step.

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).

> If not, look up your Yellow Pages for the nearest notary

My Yellow what?

Paper version of 411.

Yellow Pages. It's called a phone directory. Before the internet we printed up large lists of local people and businesses.

Yellow Pages is the local business directory.

If you're one of todays 10000, congrats!

The point I was trying to make, though, is that TD Ameritrade or Vanguard aren't any more immune to going bankrupt than a bank is.

A) A brokerage isn’t a bank

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

>>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.

They don't disappear, but how can you get them in a hurry if your custodian fails?

> How are you holding those bonds?

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?

My point is, if your bank goes bust, how long will it take you to get your stocks or shares back?

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?

That's a double whammy.

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).

> Short term treasuries were nearing a 5.1% yield as of early last week, and now are below 5% due to demand.

How short term are we talking about?

The 4 week is yielding 4.5% as of the last auction. These rates are all annualized, by the way, so you aren't getting a 4.5% bonus after a week.

Short term duration is generally considered 1 year or under. The Treasury sells bills for 4, 8, 13, 17, 26, and 52 weeks.

Banks never were great for yield, only as a place to route all your payments through, and even that is done badly in the US system as compared to Faster Payments.

Good luck when Congress fails to agree on the debt ceiling issue in June, defaults on treasuries and government bonds become nearly worthless.

Most everything is eventually wrapped treasuries. If the US government defaults you have far bigger worries.

The situation you've described has never happened. Out of all the options, it is considered the safest. People forget that the dollar is backed by the ultimate currency - military force.

There is a possibility that members of Congress are actively seeking to undermine the financial strength of the United States, and to do so will not vote to raise the debt ceiling. Weakening the federal government is their goal, conservative social issues are merely justifications.

I’m not sure what relevance you think the military has here in this situation.

There are just a few members of Congress that meet that description, however. They only wield a lot of power when the rest of Congress is divided neatly into two nearly equal parts. The moment actual default becomes a real possibility, the mainstream members of both political parties will briefly form a consensus and kick that can down the road a ways. Just like they always have. Not too far, mind you, because it must remain something they can argue about periodically.

The bad part, of course, is they likely won't do that until we've already done some damage to our credibility.

I have heard similar speculations in the Bush era. At the end of the day, it never happens.

That scenario is a can of beans and hunting deer with my 30-06 kind of situation if it really gets that bad.

Why go for a hard default when they can soft default (as now), and nobody cares?

Yes republicans in Congress will try to force a crisis, no it won't actually mean government bonds become worthless.

If you're going to hold until maturity, I don't see how the debt ceiling affects you significantly (any more than it would affect the entire asset market). The treasury will pay you eventually, likely within days.

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.

You bank is likely more stable than your broker.

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