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Comment by noduerme | Hacker News Reader

One thing I don't understand, and perhaps you could explain, is why anyone in the US would ever keep more cash in any one bank account than what was covered by FDIC insurance. It's precisely the reason I don't e.g. take my savings to an offshore bank that offers much higher interest rates. Is this just a matter of people taking trust in a bank's solvency for granted?

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Banks can offer incentives for certain levels of deposits. Better interest rates, better cards, better loans. SVB offered perks to bank exclusively with them.

https://www.cnbc.com/2023/03/12/silicon-valley-bank-signed-e...

If you took that sort of agreement and bet on being bailed out in the event of a failure, you won your bet.

This is the answer that makes the most sense.

I’m not sure about personal banking (since I’ve never had enough in a bank to worry about it!), but in commercial banking I imagine it’s routine. I work at a medium sized firm and I authorize multiple payments a week that are over the FDIC limit. I’m not sure how much juggling it would take to transact at volume and never have an account go over the limit, or for long.

FDIC limit is 250k per bank, so if you have 1 million you'd need 4 banks. If you have 10 million you'd need 40 banks. Having money spread out like that doesn't seem easy to manage. Also having 10 million in one bank gives you better interest rates and service at that bank than if you only had 250k.

Cash sweep products are a thing. For example, Wealthfront will sweep your cash into a bunch of smaller banks, putting 250k in each, so on the off chance they fail, your money's not been disappeared.

The last time anything like that happened was what, over a decade ago? People forget (for real).

Also, no one seems to have lost a dollars yet in this crisis (on the depositor side), so hard to say anyone ‘lost’ this time either.

Doral Bank failed in 2015, so 8 years? Not quite 10. The GFC was 2008 which was 15 years ago though but people still remember that one.

Even though the FDIC chose to make depositors whole for SVB, Signature, and FRC, there's no written legal guarantee that they'll keep doing this, so in the face of that, I don't think people are forgetting the $250k FDIC limit.

Anyway, my point is no one's walking up and down Main St with their $10 million and opening 40 different bank accounts by hand because the finance industry invented a product (prior to SVB, even) so no one has to do that.

oh, I don't know. Lots of people walk up and down main street. No one I know keeps more than $250k in any given bank under the same name. Obviously having LLCs, wives and children etc let you spread things out in the same bank. I had to wait 10 months in 2008 for FDIC to make me whole when a local bank I had most of my savings in at the time went under. Most people have a living memory of that.

Also, I have 8 accounts at 6 different banks and I'm not even worth $1m so I can't imagine it's too hard for someone worth $10m to figure this out.

Figure what out? I'm saying people with that kind of money have private bankers*, and don't need to spend the time making 40 different accounts and managing that because their money is already protected through a sleight of financial trickery called cash sweeping.

If you like seeing the inside of bank branches, and having unnecessary zoom meetings where the background is a picture of the inside of a bank branch, that's entirely up to you.

* eg https://www.chase.com/personal/checking/private-client

Well, there are private banks/banks that specialize in private banking (like First Republic), and private bankers, which specialize in navigating the Byzantine bullshit endemic at a normal bank. I believe you pointed to the private banker division at Chase, and most large banks have them somewhere, for large net worth individuals like you’re saying.

It is definitely an entirely different experience (either way), no doubt.

If you’ve ever tried to practically use multiple banking institutions in the US, especially through the 80s-90s, you’d immediately relate to only using a single account regardless of what the statistical hazards are. It’s 2023 and my institution limits Zelle transfers to $2,500/mo. Want more, just as fast? Back to human wires and fax machines…

Really? You could always just go get a cashiers check and walk it over to another bank. Now I've got accounts at several banks with free online transfers between them (2-3 business days)... it was more of a process in the 90s, sure, but now you can open a checking account at any major bank, link it to another bank and fuel it in 5-10 minutes. Not with Zelle, just a normal domestic wire which is usually paid for by the receiving bank.

My credit union (it’s actually very worth it, so I’m not switching) has no branch within multiple states from me. A domestic wire requires phone calls and fax, can’t be done entirely online. It’s certainly more doable with a behemoth like Chase, but then you’re dealing with all the negatives of using Chase and employees that have no leeway to use common sense when solving problems.

You’ve just described days of paperwork at most banks, in my experience, and with large amounts, things can get stuck on ways that will be days more.

If you’re dealing with large sums regularly, that quickly balloons into an unmanageable mess.

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