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What you’re talking about is FDIC insured accounts. But those only apply to savings and checking accounts (and only up to 250k like you said). Brokerage account

by mruts 8y ago

What you’re talking about is FDIC insured accounts. But those only apply to savings and checking accounts (and only up to 250k like you said). Brokerage accounts where I think most Americans keep the vast bulk of their money are not insured.

perl4ever 8y ago
The vast majority of Americans do not have a brokerage account at all, and if you need a reference, it's easy to find. According to a document[1] I found on the DOL website, in 2013, 17 million of 123 million households had a brokerage account. This number is also in decline, I read in other sources. I also don't understand what brokerage accounts have to do with retail banks. [1]https://www.dol.gov/sites/default/files/ebsa/researchers/analysis/retirement/brokerage-accounts-in-the-us.pdf https://www.dol.gov/sites/default/files/ebsa/researchers/ana...
- mruts 8y ago
  Well, why would you keep any money over 1k in a savings/checking account? Savings accounts nowadays don’t serve any purpose (you definately shouldn’t be saving money in them) besides being FDIC insured. Checking accounts should only hold temporary money in order to finance short-term liquidity constraints (paying off credit cards, etc). All extra money should be put in a brokerage account: risk-free treasuries, money markets, equities, etc. But maybe average people don’t have any extra money at all? Or maybe they use savings accounts? I don’t know, but either is sad and irrational.
  - perl4ever 8y ago
    Savings accounts seem pretty useless, only because the interest rates are currently ridiculously low. My credit union currently pays 0.3%. But here's an interesting question: since the Fed pays banks 2.4% interest on excess reserves, why can't someone start a "bank" that simply takes depositors' cash and passes through the interest from the Fed from reserving it all? The answer, I believe, is that while people have been/are trying, the Fed doesn't want that - the interest is supposed to subsidize conventional banks and not be given away to the general public.

by mruts 8y ago

perl4ever 8y ago

The vast majority of Americans do not have a brokerage account at all, and if you need a reference, it's easy to find. According to a document[1] I found on the DOL website, in 2013, 17 million of 123 million households had a brokerage account. This number is also in decline, I read in other sources. I also don't understand what brokerage accounts have to do with retail banks. [1]https://www.dol.gov/sites/default/files/ebsa/researchers/analysis/retirement/brokerage-accounts-in-the-us.pdf https://www.dol.gov/sites/default/files/ebsa/researchers/ana...

mruts 8y ago
Well, why would you keep any money over 1k in a savings/checking account? Savings accounts nowadays don’t serve any purpose (you definately shouldn’t be saving money in them) besides being FDIC insured. Checking accounts should only hold temporary money in order to finance short-term liquidity constraints (paying off credit cards, etc). All extra money should be put in a brokerage account: risk-free treasuries, money markets, equities, etc. But maybe average people don’t have any extra money at all? Or maybe they use savings accounts? I don’t know, but either is sad and irrational.
- perl4ever 8y ago
  Savings accounts seem pretty useless, only because the interest rates are currently ridiculously low. My credit union currently pays 0.3%. But here's an interesting question: since the Fed pays banks 2.4% interest on excess reserves, why can't someone start a "bank" that simply takes depositors' cash and passes through the interest from the Fed from reserving it all? The answer, I believe, is that while people have been/are trying, the Fed doesn't want that - the interest is supposed to subsidize conventional banks and not be given away to the general public.