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Comment by dehrmann | Hacker News Reader

When SVB was failing, I told anyone who would listen we need 100% FDIC insurance for all normal bank accounts. The usual response was we need to punish startups for being reckless, and we need market forces to encourage banks to be well-managed. It turns out having the time or know-how to identify poorly managed banks is rare (and if you did, you should be in the business of short selling, not making widgets), but we all know which banks are too big to fail, so just move your money there.

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There is a reason we don't want billionaires to feel safe with their assets sitting places. We want them actively using said assets to make the world better. Not just living off of leveraged value forever.

To that end, I'm not sure I see good argument for 100% protection. Money sitting in a bank deposit only creates wealth if we have the banks actively lending. And, annoyingly to me, the largest form of this for the "too big to fail" banks seems to be credit card schemes. Which I actively despise, at the moment. It also incentivizes banks to hunt out places to loan money. Which is why we have ridiculously complicated securities to back mortgages. The amount of those that have been made is only "safe" for the banks with a ton of the extra machinery they have put on top. Which has costs.

Edit: I should add that I'm not 100% on my stance here. Would love to be challenged on any of the above. Can only help my understanding.

> There is a reason we don't want billionaires to feel safe with their assets sitting places...

Between inflation and income taxes, you don't need to worry about this. I literally can't remember the last time banks paid enough interest to beat inflation and cover 37% income tax (almost 50% if you're in CA).

Billionaires care very little on either of those things? Leveraged income is not taxed. Is why you don't pay taxes as income on the loan to pay for your house. And inflation they have beat with other returns.

If anything, this is reason to keep the insurance rate low. After all, they only "lose" the uninsured part that is not recovered in bank seizure.

The scare quotes about people losing 100% of their money in SVB was just that, scare quotes. The assets did not disappear 100% and depositors are first in line.

If anything, that should incentivise wealthy people to pay attention to how a bank is being run. Full insurance means I don't give a shit.

Income tax is on the gain, not the whole amount, so beating the income tax doesn't even make sense. There's nothing to beat.

You can't deduct inflation from the interest earning, so yes the interest rate has to be high enough to cover inflation after tax.

But if it is, let's say 7 million dollars, even earning 0 interest, it can be used as collateral for loans that they can then use in places that has something to beat inflation.

Notably, this has a finite lifespan on how often you can do it. It is not some magical process that has no downside. But, to pretend the people that will buy yachts care about inflation loss on things is silly. Every single asset they buy will result in worse loss than inflation. Having safe assets that they know won't be taken is a very nice source of collateral. And note that I never envision them putting their billions away, in this manner. Just many millions. Because they have many many millions.

The problem you’re talking about doesn’t exist. Billionaires are never going to leave much of their money sitting in a bank account, because there’s always going to be better performing assets for them to invest it in. Even if they did, the banks would be putting most of that money to work themselves anyway.

I don't see them leaving all of it. I do see them leaving enough to have collateral for a loan that they can live off for a long time. Heck, just the rate that is common for bump CDs right now is not too shabby and makes me regret not setting up a savings ladder sooner.

That said, your point about better performing assets is why I don't think they care about inflation, as my response to the other thread said. I also agree that the banks should be putting them to good use. Sadly, we have active evidence that the banks are not too good at that. They seem to think it means either credit cards for the masses (which, yes, pays well for the bank), or convincing everyone to refinance their homes. Neither of which feels that good to me.

Tech stocks have screwed this up by fucking up the idea of profit versus non-profit companies. Not paying out dividends to shareholders has made that a near meaningless distinction and made it so that living off changes in the market is all folks can do. That is, you cannot own stock in a company to get residuals while they make the world better for you.

So, to that end, how do you think the banks should be putting that money to work?

This comment describes a moral judgement about consumerism, and maybe that’s perfectly reasonable, but it doesn’t relate to issues around the productive use of capital.

Not what I meant, amusingly. I seriously meant it as a question of what you think they should do? Funding consumers is somewhat fine, as far as money making goes. But our rules are made to drive to outcomes we want. So, what do we want banks doing?

I don’t presume to know what’s best for other parties to do with their capital. I think the kind of central planning you’re alluding to only produces bad outcomes for everybody involved. My only point is that the risk of capital controlled by billionaires being withdrawn from productive use basically doesn’t exist.

I'm not aiming at Central planning any more than anyone else here. My question isn't a moral based one, either. I don't like credit cards for reasons, but I am not saying they should be outlawed, either. Same for mortgages.

My question is specifically what use do you want banks making of deposits? That is better than having active participation in investments?

I think that's mostly true. You don't get to be a billionaire by sitting there. The person who just wants to live on interest stops at $5M of principal. Meanwhile, Buffett is still going. The one exception is someone who inherits a billion and doesn't feel the need to prove themselves.

Ish. I didn't intend it as a "set all money in bank and live off interest." Rather, more like put 10% in a safe place where I know I will make 5% on it. Then, 30% in 10 gambles that may make bank again, kind of thing.

Realistically, no individual is managing billions without literally having staff accountants. Such that they can and will be more sophisticated. My assertion is in that sophistication will be pockets of "safe" assets. And I am further pushing that there are benefits to smaller caps on those safe assets

My argument: Accounts seem to be de facto fully protected anyway, or at least close enough. So making it official allows the FDIC to assess the proper rates for what they're actually insuring (which is necessarily super-linear due to increased variance). Anyone who wants to park lots of money without paying the FDIC insurance cost can buy Treasury bills/notes directly.

> Anyone who wants to park lots of money without paying the FDIC insurance cost can buy Treasury bills/notes directly

This brings up the interesting question of what the role of banks should be. When savers have access to money market funds investing in short-term government debt (this is basically what SVB bought), why bother with the intermediary? We're also in a world of securitized mortgages where banks are just the originators. There are also mortgage originators that just do mortgages. These days, the only unique services banks provide are retail services and small business loans.

SVB bought mortgage backed securities as well, not just treasuries.

This is mainly from poor coverage of what happened with SVB. The main thing protected there was the value of long term bonds. Last thing that fed wanted was for those to plummet at auction. Not the large deposits that would have gone down with them.

I don't understand the argument you are making. Regardless of any additional reasons it happened, depositors at SVB were bailed out, right? And it's widely held that depositors at the TBTF megabanks will be bailed out similarly, right? So unless/until a bank fails and the feds actually make large depositors take a haircut, then it seems that large accounts are de facto covered.

To me, it would seem the dynamic is not one of "large depositors can do their own diligence and giving them FDIC coverage would be a burden", but rather "banks and their depositors aren't responsible enough to accept the consequences of uninsured accounts".

My argument is that they were "bailed out" to the tune of 20% or so. And really only if they insisted on pulling their money out immediately. Not "everything over the insurance number." (Which, for many of these was 0. They were completely uninsured, is my understanding.)

Per reporting I can easily find (in that I'm not searching too hard on this), they had 167 billion in assets, and about 119 in deposits. Per the reporting, the sale that was managed by the FDIC sold off part of those assets for 72 billion, at a reported discount of 16.5 billion. About 20%. Now, granted, it is possible that the other 90 billion of assets are somehow way worse, but I have not heard further panic on those?

But, just going by those numbers there was clearly never any risk that depositors lost everything over 250k. Which is how this is largely getting reported.

> But, just going by those numbers there was clearly never any risk that depositors lost everything over 250k. Which is how this is largely getting reported.

For sure! The news coverage bothered me too because it seemed to be implicitly treating the SVB failure like a cryptocurrency exit scam, where most/all of the money is just gone. If depositors did have to take a haircut it might have even been lower than 20%, as my understanding is that the FDIC has some power to claw back withdrawals that were part of the bank run. I still think it's fair to call it a bail out because since those accounts weren't FDIC insured then the policy was supposed to be for them to not have been made whole, and they were.

But I don't really see how this affects my original argument. Whether subsequent banks have 5%, 20%, 50%, or 100% of their assets vanish, the political calculus is going to be the same.

Then we are fairly aligned. I've been used to talking to people that thought bailed out meant they had nothing, otherwise.

I do think the calculus of keeping the bonds from visibly losing value was more important. (Edit: but I do not disagree with your assertion.)

>There is a reason we don't want billionaires to feel safe with their assets sitting places. We want them actively using said assets to make the world better.

Okay, but the $250k cap doesn't do that, it just encourages them to do the exact same thing, shuffled across multiple banks.

Oddly, it is worth noting that many of the accounts at SVB were completely uninsured business accounts.

At any rate, yes. But you can only split billions across so many 250k banks (I haven't checked the numbers, but I'd assume this is limited by number of banks). And presumably, that means that many more locally focused places managing more funds. That is, the spread is part of the point.

Yes, but it's just as "with their assets sitting places"[1] as it was before -- the shuffling doesn't address the problem you raised in your comment[1] and proposed that as a solution to.

[1] https://news.ycombinator.com/item?id=35749378

I'm not sure I follow? Use some charity in this, as I am on a phone most of the time. But, sitting many places is better than fewer. And smaller amounts is better than larger.

But! This is just like lines of code. No "true" value answer. And pathological is pathological.

So, did I propose a solution? I specifically think 100% covered it bad. Not clear what number we want.

You don't follow... your own argument, that you were advancing? You were bringing up the insurance cap to support this argument:

>There is a reason we don't want billionaires to feel safe with their assets sitting places. We want them actively using said assets to make the world better.

That is, you advocated the cap as a means to make billionaires use their assets to make the world better. I replied[1] that the cap doesn't make billionaires do that (that= "make the world better"), but simply makes them do the same thing they were doing before, but shuffled across many banks. (i.e. "feel safe with their assets sitting many places, rather than one").

Then, you forgot what argument you were making, including this core point, and are now asking me to re-explain it to you, having since drifted off to a completely different point about whether there are other benefits, unrelated to this point, to storing a billionaire's stash in many places vs one.

Normally, I accept that people might miss key points from earlier in the thread, but here, this is your own argument, and you seem to have forgotten you made it. Come on, show some respect to the people who try to engage with you.

[1] https://news.ycombinator.com/item?id=35754102

I don't follow how my argument is that any "safe" money is bad. You seem to be taking my argument to the absurd? Of course I don't want to make it so that nobody has safe assets anywhere.

You could be arguing that having the money spread out is not its own good? But, I have specifically posited that having the money spread out among many banks is a good, in itself. What is the number? No clue. Is it guaranteed that having it in several places is better than having it in one? Not really, but the odds of any one bank doing great things with the money seems lower than the odds of any of several banks doing good things with it.

So, yeah, what part are you not following?

Despite pointing it out three times now, you don't seem to realize that the discussion is about whether the insurance cap is a good solution to the problem of rich people not using their money to make the world better, as you originally proposed, in the comment I originally replied to. You're not taking this discussion seriously. When you want to acknowledge the existence of the point I was engaging with, the point you raised, we can continue. Until then, I'll just use this thread as a reminder not to waste my time with you in the future.

You aren't really engaging. Is it the best and sole solution? I never asserted it was. Unless you go with the weakest read. Which, charity to the argument, if you want to engage.

So, my assertion a little longer spelled out it that I don't think we want giant caches of wealth in small numbers of places. I would prefer active use, I think. But diverse use by many actors is a good means to that. So, if it gets 250k in 100+ banks, that has better odds that someone finds a use that isn't just "credit cards."

That said, I confess I also see little value conversing with you. I hope others have a better experience with you. Good luck.

>So, my assertion a little longer spelled out it that I don't think we want giant caches of wealth in small numbers of places. I would prefer active use, I think. But diverse use by many actors is a good means to that. So, if it gets 250k in 100+ banks, that has better odds that someone finds a use that isn't just "credit cards."

Great! This is the first time you've actually said anything that connected "rich people making the world a better place" with "stashing money in multiple banks rather than one". It's still a dubious argument, because in both cases the money would be getting invested, as opposed to gathering dust, and the bank would just invest any excess money it had with other banks, creating the same investment.

It's also really frustrating to have to keep reminding you of what your argument was, in order to get to that point. It would have been much more productive if you had said from the outset "okay, whether rich people's money gets invested at all is a dubious benefit to the insurance cap. But there might still be other benefits, like reduced systemic risk...".

But you didn't do that: instead you acted shocked that I was asserting there were no benefits at all to spreading money across multiple banks, and spoke as if you didn't remember the original benefit you were asserting.

>That said, I confess I also see little value conversing with you

Correct: people that force you to be rigorous in your comments, and don't let you change the topic to hide previous dubious arguments, are going make you look bad. I understand not wanting to get called out on these unproductive tactics, especially if you prefer looking smart rather than learning something.

It isn't like these banks are really that badly run. They've just inherently got interest rate exposure. It isn't like the 80s S&L crisis or the 2009 financial crisis where the paper was backing bad investments or mortgages which had defaulted. The problem is just interest rate risk and that the current value of the paper has gone down. That only creates a problem if the bank is forced to sell those assets, and if there wasn't a classical bank run then the bank wouldn't be forced to sell those assets. This is exactly the kind of borrow-short-lend-long risk that all banks inherently run and is why we supposedly have the FDIC to stop these kinds of bank runs. SVG had worse issues where their deposits were inherently draining due to the startups using them for their corporate accounts, and then they went out and sold some of their paper, booking their losses, instead of looking for financing.

For those looking for the punish-the-rich morality play, the real winner here is likely to be JP Morgan or PNC which may bid to buy up the assets, which is just the rich-getting-richer and a large bank swallowing up a smaller community bank and more consolidation and monopolization of the financial sector.

They've just inherently got un-hedged interest rate exposure.

Yup, that is basically inherent. In order to hedge their interest rate exposure they'd have to find some counterparty that can afford to do it - there is no magic hedging or insurance fairy - which with previous interest rates would probably wipe out all their interest income and expose them to counterparty risk at the same time if they could even find anyone.

Yeah, AIG selling credit default swaps against CDOs comes to mind. Hedging isn't magic, someone else winds up eating all the losses.

In reality, there is no such thing as a "bank" in the sense that it's a big vault of money so you don't lose it in a house fire.

Every bank today is really a Highly-Levered Bond Fund. If we increase FDIC insurance to 100%, without commensurate changes in what banks are allowed to do with customer deposits, this seems like it would create a moral hazard where banks would be allowed to do all kinds of crazy shenanigans because they know they'll be bailed out.

To be clear, I'm for 100% FDIC insurance, but if we get this without getting much more stringent duration risk transformation standards (e.g. don't load up on long-dated treasuries in a low-rate environment), I think it could actually make the banking stability issue worse :(

Banks are unstable but that is good because we want maturity transformation. A great society is one where old men are paying young men to plant trees with money that would be sitting around instead.

I’m not sure I fully agree but I like it

> It turns out having the time or know-how to identify poorly managed banks is rare

The intended solution isn’t for you to vet your banks, it’s to not exceed the insurance cap. People appear to be willfully ignorant of this.

No, it’s not hard to stay under (cash sweeps and money markets exist). Yes, these products are actually beneficial and not just accounting tricks (cash sweep diversifies bank’s depositors as well, reducing systemic risk).

There is no social value to raising FDIC limits as a technicality via financial engineering. The money spent to maintain these schemes is pure dead weight loss on the economy.

No it’s not. Sweep accounts reduce systemic risk because your money is at different banks. MMFs are an independent product.

Consider SVB. Bank run aside deposits were poorly diversified and many depositors needed money at the same time because they were burning runway. Even without a bank panic this effect alone could cause losses on banks with large HTM portfolios. Unlimited insurance does not solve this problem, except in paying out, which the FDIC ideally would not have to do.

Deposit diversification does solve this problem, and the only reason it’s incentivized for depositors is because of the insurance cap. The overhead of sweeps is quite low and money markets even lower (MMFs with the fed outperform best bank deposit rates even after management fees).

Honestly retail banking is the real dead weight loss. Sweep accounts often offer better rates than the underlying banks give their customers because the sweep accounts have low overhead for the bank and pass on the savings. Same goes for other banking products like CDs: banks offer better rates on the market than to their own customers.

> many depositors needed money at the same time because they were burning runway. Even without a bank panic this effect alone could cause losses on banks with large HTM portfolios.

Seems like there should be a market for a bank that advertises “no long-duration HTMs unless we hold a duration and interest-matched CD” and “short-dated investments only on checking acct balances”.

If that doesn’t exist, it sounds like big depositors were ignorant or quite happy to get some extra interest (or fancier offices/marketing) in exchange for that risk.

This is what MMFs accomplish, and they yield higher than banks accounts.

Sorta. The problem is big corps do a lot of transactions in their account and can't predict when that $850k (or $850m) transfer is on the way in as their bank is collapsing. And even debits can't always be predicted, but I doubt big payments are pre-authed like that.

Not sure if a bank would be 100% protected if they had a script that checked their balance every minute and sent it to a MMF.

We are a small business (less than 100 employees). We have about 50 large paying customers. As soon as SVB happened we transferred almost all our money out of FRB to our other banks and only left a small amount of the money ($185k) under the ‘insurance cap’. But we still have payroll going out, we have deposits coming, etc. so we started transferring all that over. It’s not simply “not exceeding the insurance cap’. It’s a huge pain and takes a very long time since our customers are huge companies and updating our banking information with them is a long drawn out process.

Well, we transferred most of the customers over this last month, but one of the customers just yesterday made a deposit of $485k. $485k + $185k is well over the insurance limit. I believe it takes 3 days or so to clear so we wouldn’t have been able to transfer it out immediately. Maybe we can ask them to cancel it on Monday, i am not sure yet. As a small business our cash flow is very tight. We don’t have experts on the team to juggle multiple banks and make sure all deposits are less than $250k or watching out in case the bank fails the day after. Maybe there are tricks like you mention but most small businesses do not have experts on this stuff and I don’t think we should have to be.

Is there a bank out there that advertises that they don’t do any long term fixed loans with their checking account deposits?

Seems like there should be a big market for that kind of thing. No idea why anyone holding large $$$ would go with anyone else.

Money markets. You can loan your money overnight to the fed at zero risk for 4.5% right now.

Sure, maybe changing is hard in the short term. The solution would have been to not do highly consolidated banking over limits in the first place.

> We don’t have experts on the team to juggle multiple banks and make sure all deposits are less than $250k

My key point is that there are products that do this and also yield higher than retail bank accounts. Difficulty is a straw man. If retirees on bogleheads can do it so can you.

Bank depositors should have a choice depending on their risk tolerance. There should be fully insured accounts which charge a fee to safely hold your money. And there should be uninsured accounts which pay interest. But the notion of earning interest on insured accounts is essentially financial alchemy: it appears to create something from nothing and ends to causing serious moral hazards.

AT1 bond holders at Credit Suisse knew that those are risky bonds but now they are all filling legal actions because they lost them.

You would see the same issue. Everyone would go for the risk and when the ship sinks it will be "we are to to big to fail! Who could have predicted this? It's a special situation, etc. etc.".

How would that work exactly?

The FDIC Fund has to know how much cash to keep on hand to cover total insured deposits. The minimum is something like 1.35% of all insured deposits if I'm not mistaken, which they have actually been under for a while now. If all deposits are covered 100% the find would have to be dramatically larger, do they just take AL of that from the banks immediately?

Up the rate and ammortize it over the next 20 years. The alternative is to kill the regional banks and concentrate power in the few really huge banks. I’m not much for conspiracy theories, but the problem is so obvious and the solution so simple, it does make one wonder if that’s not intentional.

The fund is already below their minimum requirement though and didn't actually have enough cash to cover SVB insured deposits when it failed. Amortizing over 20 years likely means tax payers will cover it if any more banks fail in the near future

The funny thing is, if you insure everything everywhere then why would anyone pull their money out of a bank to begin with? That ends the bank runs and the deposit flight right there. It probably wouldn’t come to that.

Beyond that, if all money is insured 100% why would banks keep any reserve? And what keeps a check on the risks banks are willing to make?

I'd be happy to see us abandon the fractional reserve system all together, but that means blowing up the system entirely and getting rid of the concept of debt. Short of that, I don't see how we could keep fractional reserve while making deposits completely risk free.

The same thing that keeps them from doing that now. Banks are required by regulation to keep enough liquidity on hand and have restrictions on what kinds of assets they can hold. They don’t do it out of an abundance of common sense anyway.

Regulation doesn't have much teeth when banks are too big to fail and all deposits are insured. Fines related to breeching regulation often come years after the infractions started and never amount to the gains banks wanted in the meantime. In the end regulation amounts to a slap on the wrist and the feds just getting a piece of the pie.

We don't necessarily need those regulations of the money isn't insured though. Banks should be deciding how much to keep on hand based on their own risk profile. If they make a bad bet and lose the bank folds, depositors get priority on asset liquidation, and other banks take note.

A bank too big to fail, is also too big to exist.

2008 happened and we collectively decided(?) this isn't the case. Don't expect anyone to care this time, either.

May just be me, but I don't remember getting a say in this in 2008

Did you vote from 2004-2008? If so, you had your “say”. The USA is a representative democracy. If you elected idiots unable to do the job it’s on the royal “you”.

I don't think that's meaningfully the case between gerrymandering, the electoral college, voter suppression, first past the post voting, and lobbying.

All decisions done by electorate or those who they elected.

Despite the establishment not wanting it, Trump still won. Everything you mentioned only goes so far once people are unhappy.

There is no legal technicality in which Trump won. He received a huge amount of votes, there's no denying that, but voter fraud on any meaningful scale was never proven after they looked under every rock they could find. Beyond that, the electoral college and Congress finalize election results and they don't appear to have breached any protocols.

You’re probably confusing parent, Trump definitely won 2016.

Claiming that casting one view in one election means that we all made the specific decision to deem some banks as too big to fail is a bastardization of how or system works to begin with.

If I candidates I voted for lost, I had a chance to partake in democracy but how did I actually have a say in a decision made by someone else?

And if the entire question of banks too big to fail want even a talking point in 2004, how was I voting on that?

For me to have a say, at a minimum my elected representatives would have had to engage with his constituents on the new issue. Even better we could handle those situations more like the Swiss, putting it to a ballot vote.

In no way is casting a vote when effectively given a choice between two major part candidates equivalent to ne having any day in how the government makes a fundamental decision to change the banking world.

Banks being too big to fail is a bit common sense unfortunately. We cannot let our financial infrastructure implode as the damage will be much more severe than some inflation.

> And if the entire question of banks too big to fail want even a talking point in 2004, how was I voting on that?

The question is who caused them to fail, and did you vote for anybody that had anything to do with it? This event started in 1994 and didn’t really end until near 2012. You probably voted a few times in that timeframe.

There's a whole generation of people who were too young to vote in those elections who have to live in this 'bail out' world. I'm 34 and I couldn't vote in 2004. 2008 was my first presidential election. We definitely didn't get a say and a lot of us don't agree with our elders.

The good thing is you’re old enough now, so let’s see if you vote to continue or end this. We’ll definitely have another 2008 again, potentially in the next decade or 2, as the current administration is setting that up now with special mortgage rules for those with good credit to help secure mortgages from those with bad credit.

You could have written a letter to your representative that expressed that you'd vote for them if they let the big banks fail, even if that ends up causing a Great Depression 2.0 that ends the dollar's global supremacy that we all take for granted. Of course, 99.9% of voters aren't going to express the same view.

>I told anyone who would listen we need 100% FDIC insurance for all normal bank accounts.

I'm not an accountant, but the fine print does say "Up to at least $250,000.00.", so FDIC insuring the entirety of savings like they did this time around isn't exactly unexpected. They kind of need to if the goal is to shore up the commons' trust in banking, anyway.

This all being said, it doesn't take a rocket scientist to understand it's a bad idea to keep all your eggs (savings) in one basket (savings account). If you're fortunate enough to have enough liquid funds that all of this is a significant concern, definitely consult an accountant about spreading those funds around to mitigate damage and not lose out if the FDIC decides covering the entirety of savings is not something they want to do on that particular day.

I just don’t understand how none of the 5000 banks in USA haven’t renamed themselves as “safe bank” and promises to only invest in t-bills or maybe just floating rate low-ltv loans. That’s great for entities finding themselves with millions in their checking account.

Interest rates would suck, but that’s the price you pay for insurance.

Anyone chasing higher rates or pricier customer service (or going with whichever bank blows their budget on marketing) is playing with fire.

Why would they be any safer than the too-big-to-fail megabanks?

because they're not taking the same risks, but yeah, if there are banks that can take risks while someone else bailouts any losses from those decisions, then yeah, I get going with the latter.

As recently as 1 year ago, the fed funds rate was 0.2%, which isn't enough to pay the overheads of a bank.

Banks don't move fast enough to reinvent their whole business and churn their whole portfolio into T-bills on that time scale, and take too long-term a view for "let's just shutter the business when rates go back to zero" to be a business model they will consider. Having a single product - a single account type that is backed by T-bills - is not something regulators will allow a bank to do: all deposit accounts has to be backed by the bank as a whole.

However, there are non-banking businesses that don't have these constraints, and some of them are doing exactly what you suggest. They are called money market funds and business is great for them right now. You can get the returns and safety of short term Treasuries in return for foregoing other services your bank provides (physical branches, credit cards) and accepting a minor liquidity risk that the fund could pause withdrawals.

> As recently as 1 year ago, the fed funds rate was 0.2%, which isn't enough to pay the overheads of a bank.

Then you charge negative rates or monthly fees

"Normal" bank accounts do not have more than 250k. The only thing that should change is that the limit should apply to one's total assets in all FDIC banks, not per bank.

Counterpoint, they should just get rid of the FDIC.

And if you flagged me, fuck you. The blatant adversarial tone of this comment means it should be flagged just on its own. Flagging my comment without flagging this moronic nonsense is clear evidence of bias and gaming the flag system on HN. If you don't like the obvious counterpoint that the FDIC probably shouldn't exist at all given the moral hazard it creates for all bank depositors, you're a smoothbrain.

I didn't flag you. My comment is not adversarial. The vast majority of Americans have less than 250k in their account. Thus having above this amount is abnormal.

The vast majority of Americans have less than 250k in all their savings accounts

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