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Comment by epistasis | Hacker News Reader

So what do you do when your payroll is more than $200k? The depositors were not treating SVB as investment, they were bank accounts for doing transactions.

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That's not our problem to solve, but seeing how millions of other businesses were able to pay people maybe it's SVB that needs to figure out how to do this and not lowly commentators.

Millions of other businesses do not have a secret strategy to pay people without ever landing >>$200k in a single account. Their banks just didn’t fail so it wasn’t a problem.

Of course it's not secret, but they do. Read almost any other comment here.

Sweeps and obo accounts are the bone simple answer to this that every mainline treasury has used for this problem for at least 30 years.

Further the banking ecosystem in the US is predicated on the idea that depositors, especially large ones, are doing their own diligence on the health of the bank.

Yeah but but first principles! /s

There are banks that sweep the money across various other banks automatically.

Things I learned in Econ 101 like 25 years ago, and one of about four options if you google "how do companies manage payroll with fdic limits".

But people with [mb]illions of funding just plopped money in a single account ..

Indeed, most of SVBs customers were those who had almost zero business finance experience. There were lots of startups but there were also lots of normal businesses and non-profits in the Bay Area that used SVB.

Perhaps the slow depositors should be punished for not being sufficiently sophisticated, or as quick as the Thiel-backed startups that got the bat-signal to do a bank run. But the "moral" value of letting all those organizations lose their deposits is very low. The moral value of letting SVB fail, which it did, seems high to me!

> Indeed, most of SVBs customers were those who had almost zero business finance experience. There were lots of startups but there were also lots of normal businesses and non-profits in the Bay Area that used SVB.

The thing is that you don't need to be a financially sophisticated. Why are they making companies without talking to a CPA? They can get an account with PayChex and they will literally handle everything related with payroll. If your average mom and pop restaurant didn't do this we would fault them for being irresponsible.

They disrupted financial sophistication

The depositors were using SVB because SVB was willing to hand out loans to startups with no revenue that other creditors wouldn't fund, right? Using a less reliable vendor to get a better rate is a risk, whether that vendor is supplying labor or parts or banking services.

One could argue that the depositors didn't know SVB was unreliable, but that's kind of undercut by the fact that there was a run on the bank in the first place.

Use your political power to lobby for making electronic money transfers a government operated utility.

Buy insurance for this type of situation. It's not like Silicon Valley lacks the funds to buy insurance. The rest of us are MANDATED to buy insurance for our cars and our healthcare, and many of us live paycheck to paycheck.

Silicon Valley, however, home to the world's greatest concentrations of private wealth? Oh no, thats a too much to ask that they play by the same rules.

Buy private deposit insurance.

A corporation can hold t-bills and cash equivalents instead of relying on a bank account where the $250K FDIC limit will bite them.

This notion that the $250K FDIC insurance limit is an acceptable part of our system, except in cases where a bank fails and the depositors are... sympathetic? It's incredibly silly.

Multiple accounts?

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