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From the news I've been hearing recently, I think the idea is that you use a sweep account/purchase overnight bonds from the fed so that your deposits leave the bank every night and are put back the following day. So you're covered in case of a bank failure.

(Banks are already charged for the current insurance up to $250K)

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Interesting. Is that a service banks offer? I suppose that it would mean that the bank truly could not lend against deposits that use this mechanism, so I wonder how much they would charge for this.

I don't know about banks but eg Wealthfront will do that for you and give you 4.3% APY on cash!

https://www.wealthfront.com/cash-account-participant-banks

Yes banks offer this through a network with others banks,and they have reciprocity so if I puts $250k in another members bank they put $250k in my bank so the members banks don't really "lose" deposits. Net, the deposits can be used by the bank in the same way they usually are.

A sweep account is a very common business account and most banks offer this, if you don't pick it based on your balances they'll call you up and try and sell you this service. SVB strangely did not have this product for some reason.

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