7 ms·

Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should

by jarym 4y ago

KerrAvon 4y ago
I think you should be made whole, but only if you submit a public statement supporting welfare for individuals as well as corporations in trouble. If you want a socialist handout from the government, fine, but you can’t be a hypocrite about it.
secondcoming 4y ago
In the UK, consumer deposits are protected only up to £85k. Everyone has several bank accounts. If the person on the street knows this, it’s not too much to ask that someone running a business does too.
- deleted 4y ago
  [deleted]
- muyuu 4y ago
  yep and if US$250K in cash is not a lot to have in deposits, then certainly some basic risk management and due diligence shouldn't be too much to ask for either
slondr 4y ago
> Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes, because that is how risk works. > And that my deposit should vanish into thin air? No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both.
- skwirl 4y ago
  >No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both. Why would I do that when I can bank with a too-big-to-fail bank like JP Morgan Chase, Citibank, Wells Fargo, or Bank of America?
  - AlchemistCamp 4y ago
    In the case of many founders, especially non-US citizens, those banks won’t open accounts for them.
  - baq 4y ago
    That’s the point?
    - skwirl 4y ago
      The point is that everyone should bank with four too-big-to-fail banks and all other banks in the US should be shut down? That's certainly A Take. I thought we wanted to do away with too-big-to-fail banks, not permanently cement them into place.
  - pixl97 4y ago
    Because you're assuming just as much risk that one of these banks won't lock the entirety of your account for {reasons} while you fight it out with them.
  - kelnos 4y ago
    If you can, then do that. "Bank with too-big-to-fail bank" is a rational choice that you could make while doing a risk assessment. Unfortunately, many small companies and first-time founders can't get a business account at one of the big banks. Hence: SVB. I don't think this means we should automatically bail them out, though.
    - trogdor 4y ago
anonymous_sorry 4y ago
Yes. Insure against this if you like.
dctoedt 4y ago
Yes, actually — choices have consequences, or so we keep being told by "the market will provide everything!" capitalists.
- nightmarish 4y ago
  [flagged]
  - IncRnd 4y ago
    If they are asking for government assistance to bail them out of their own problem that were created when they lobbied the government to lower oversight regulations of SVB, then no, they aren't capitalists.
BobbyJo 4y ago
That is the contract you are signing, so yes?
toomuchtodo 4y ago
SVB lobbied to not be regulated as strongly as other banks, and won. You would be perfectly fine at most other banks. This was a choice. https://www.theguardian.com/business/2023/mar/11/silicon-valley-bank-weaken-risk-regulations-svb https://www.theguardian.com/business/2023/mar/11/silicon-val... Edit: https://www.levernews.com/svb-chief-pressed-lawmakers-to-weaken-bank-risk-regs/ https://www.levernews.com/svb-chief-pressed-lawmakers-to-wea... > Eight years before the second-largest bank failure in American history occurred this week, the bank’s president personally pressed Congress to reduce scrutiny of his financial institution, citing the “low risk profile of our activities and business model”, according to federal records reviewed by the Lever. > Three years later – after the bank spent more than half a million dollars on federal lobbying – lawmakers obliged.
- garry 4y ago
  We are asking for new regulation that would prevent this from occurring.
  - DrBenCarson 4y ago
    Losing your business is a powerful way to learn a lesson. Don't ask taxpayers to fix your mistakes for you.
  - davidgerard 4y ago
    That rule already exists. It's Basel III, and SVB was one of those who lobbied to have it removed for particular US banks in 2018. As you well know. Here's the explainer for everyone else: https://archive.is/gmJxU https://archive.is/gmJxU
  - nightmarish 4y ago
    [flagged]
- kzz102 4y ago
  It's truly remarkable that most likely SVB lobbied congress to allow more risk taking because it will encourages innovation, while in reality what it did destroys innovation.
nickpeterson 4y ago
I guess why didn’t you spread it around to multiple banks?
- novalis78 4y ago
  …which is what many crypto companies have had to do for a very long time… bank redundancy is crucial in an environment where innovation has stalled, regulations stifle and monopolies abound.
deleted 4y ago
[deleted]
delusional 4y ago
Are you arguing for the abolishment of private banking and erecting a government run banking institution in its place? because it sounds like that to me.
gameshot911 4y ago
You don't lose everything, only a percentage based on what the FDIC isn't able to recover after the sale of all assets. And - yes.
- DennisP 4y ago
  That process takes a long time. Most startups would be out of business by then.
  - IncRnd 4y ago
    Just about everyone in the US who has a business bank account faces that same issue. There have been hundreds of bank failures before this. SVB account holders are not unique and probably won't get special treatment.
  - beezle 4y ago
    Then they should have only kept the minimum funds necessary for transacting business in that bank account and kept the rest in short dated treasury bills at another institution(s). Part of being a company is having a treasury department to manage the cash flow needs, whether that is one person or ten.
echion 4y ago
> Are you saying if I deposit [...] I should just accept the impact [...] due to events unrelated to my actions and choices? You chose that bank and you chose to deposit more than $250,000. Are you saying the limit should be higher?
- pixl97 4y ago
  I mean when that limit was set 250k was a lot, but it really needs to be pegged to inflation.
  - daviross 4y ago
    You mean 2009? The limit was 100k before then. I wouldn't be against pegging it to inflation, but that's still only moving it up to ~$330k.
  - subsistence234 4y ago
    that limit was set in 2008. before that it was $100k
leipert 4y ago
I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? It hasn’t to be this situation, but if your accounts are flagged for fraud or someone hacks an account, aren’t you safer by distributing cash in multiple banks?
- kibwen 4y ago
  People keep saying 250k, but it's actually 500k for any account with two signatories, which a company should be trivially able to produce.
- TuringNYC 4y ago
  >I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? On the topic of FDIC insurance and startups... I'll put in a shameless plug for a startup I helped launch 20yrs ago: *Promontory Interfinancial Network" https://www.intrafi.com/solutions/depositors/ https://www.intrafi.com/solutions/depositors/ It was a startup them (now acquired), and created a bank deposit product "CDARS" which took customer deposits and distributed it across (k = N/<FDIC Limit) banks and kept the relationship as a single bank with a single account. Even cooler, as k other people did it at k other banks, the service would just swap deposits across all the banks. It was a super-cool and valuable product, and i'm proud to say I helped write the matching engine for it back in 2002. I realize this doesnt help startups with locked funds at SVB, but I'm pointing out -- there are options out there to have 100% FDIC insured safety for both individuals and startups.
- dehrmann 4y ago
  This workaround seems rather silly when it mostly applies to medium-sized businesses trying to get safe, stable bank accounts. FDIC coverage is too low for businesses.
  - JohnFen 4y ago
    There are a number of mechanisms besides the FDIC that are commonly used for depositors of this scale. You can even buy your own insurance, if nothing else.
danny_taco 4y ago
And who do you expect to foot the bill to recover your money? There are ways to mitigate this risk and it's not the taxpayers problem you mismanage your assets.
nocoiner 4y ago
Look up CDARS. There are well known cash management strategies that solve for exactly this set of circumstances. I’m not really sure why taxpayers are supposed to backstop CFO competence? But to answer your question, yeah, I think the equity in a for-profit business takes the risks and rewards of capitalism as they come. If the owners didn’t want to lose the basis points by holding cash in CDARS or liked the interest paid by SVB (approximately twice the median of other financial institutions), they probably shouldn’t have been trying to pick up pennies in front of steamrollers or expecting taxpayers to save them from the consequences of that freely made decision. Capitalism, baby.
- TuringNYC 4y ago
  Awesome to hear about CDARS on this board. CDARS have only seemed valuable twice in my life (2008, and yesterday)...but that is how insurance-linked products are supposed to work. You only need them when you need them. But when you need them, it is darn good to have them.
mindcrime 4y ago
Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes. That's the way this works. Or you can choose whatever risk mitigation strategy you're comfortable with: spread your deposits across multiple institutions, buy Krugerrands and bury them in the backyard, purchase 3rd party insurance whatever.
- DennisP 4y ago
  People keep talking about buying third-party insurance for this but a quick google didn't turn up any mention of insurance like that. Could you link some?
  - IncRnd 4y ago
    That's very odd, the entire first page was full of hits for me. What were you searching? Take a look at https://www.forbes.com/advisor/banking/ways-to-insure-excess-deposits/ https://www.forbes.com/advisor/banking/ways-to-insure-excess.... It explains several methods, including extra deposit insurance from CDARS, MaxSafe, Depositors Insurance Fund, etc. It also explains cash management accounts, credit union overflow, using multiple banks, and so forth. I can't help but think a good CFO or comptroller would be well aware of these.
    - DennisP 4y ago
      Yes, I'm aware that I can put money in multiple accounts, or get an account that spreads the money to multiple accounts for me. None of these are what I was responding to: the suggestion to "purchase 3rd party insurance." The closest in that article is DIF but even that isn't insurance you go and buy, it's another kind of special bank account available at DIF's member banks. As far as I can tell, you can't just go buy supplemental deposit insurance, but for some reason people keep suggesting that as something SVB's depositors should have done. (And as someone who's worked as the first employee of a startup, I can tell you it was while before we were able to get a CFO.)
IncRnd 4y ago
Are you saying that the more successful you are means that everyone else should cover your losses due to your banking relationships?
gigitrix 4y ago
You don't accept it, you deal with the regulators and FDIC and demand they release liquidity as soon as possible, which they are striving to do.
JohnFen 4y ago
If you deposit more than $250k, you absolutely should take actions to limit your risk to an acceptable level. There are myriad ways to do this. > I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? You should hedge against potential losses, yes, absolutely. You're knowingly taking a risk. Just like every other risk in business, you determine if you can take the hit if things fail, and if you can't you arrange a mechanism that will reduce the damage to a level where you can. It's just basic business management.
friend_and_foe 4y ago
Or, you should purchase private additional insurance, yes. It's not like it didn't say "covered up to $250,000" on the package, it's not like theyre the only bank in town, it's not like the FDIC was the only option.

by jarym 4y ago

KerrAvon 4y ago

I think you should be made whole, but only if you submit a public statement supporting welfare for individuals as well as corporations in trouble. If you want a socialist handout from the government, fine, but you can’t be a hypocrite about it.

secondcoming 4y ago

In the UK, consumer deposits are protected only up to £85k. Everyone has several bank accounts. If the person on the street knows this, it’s not too much to ask that someone running a business does too.

deleted 4y ago
[deleted]
muyuu 4y ago
yep and if US$250K in cash is not a lot to have in deposits, then certainly some basic risk management and due diligence shouldn't be too much to ask for either

slondr 4y ago

> Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes, because that is how risk works. > And that my deposit should vanish into thin air? No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both.

skwirl 4y ago
>No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both. Why would I do that when I can bank with a too-big-to-fail bank like JP Morgan Chase, Citibank, Wells Fargo, or Bank of America?
- AlchemistCamp 4y ago
  In the case of many founders, especially non-US citizens, those banks won’t open accounts for them.
- baq 4y ago
  That’s the point?
  - skwirl 4y ago
    The point is that everyone should bank with four too-big-to-fail banks and all other banks in the US should be shut down? That's certainly A Take. I thought we wanted to do away with too-big-to-fail banks, not permanently cement them into place.
- pixl97 4y ago
  Because you're assuming just as much risk that one of these banks won't lock the entirety of your account for {reasons} while you fight it out with them.
- kelnos 4y ago
  If you can, then do that. "Bank with too-big-to-fail bank" is a rational choice that you could make while doing a risk assessment. Unfortunately, many small companies and first-time founders can't get a business account at one of the big banks. Hence: SVB. I don't think this means we should automatically bail them out, though.
  - trogdor 4y ago

anonymous_sorry 4y ago

Yes. Insure against this if you like.

dctoedt 4y ago

Yes, actually — choices have consequences, or so we keep being told by "the market will provide everything!" capitalists.

nightmarish 4y ago
[flagged]
- IncRnd 4y ago
  If they are asking for government assistance to bail them out of their own problem that were created when they lobbied the government to lower oversight regulations of SVB, then no, they aren't capitalists.

BobbyJo 4y ago

That is the contract you are signing, so yes?

toomuchtodo 4y ago

SVB lobbied to not be regulated as strongly as other banks, and won. You would be perfectly fine at most other banks. This was a choice. https://www.theguardian.com/business/2023/mar/11/silicon-valley-bank-weaken-risk-regulations-svb https://www.theguardian.com/business/2023/mar/11/silicon-val... Edit: https://www.levernews.com/svb-chief-pressed-lawmakers-to-weaken-bank-risk-regs/ https://www.levernews.com/svb-chief-pressed-lawmakers-to-wea... > Eight years before the second-largest bank failure in American history occurred this week, the bank’s president personally pressed Congress to reduce scrutiny of his financial institution, citing the “low risk profile of our activities and business model”, according to federal records reviewed by the Lever. > Three years later – after the bank spent more than half a million dollars on federal lobbying – lawmakers obliged.

garry 4y ago
We are asking for new regulation that would prevent this from occurring.
- DrBenCarson 4y ago
  Losing your business is a powerful way to learn a lesson. Don't ask taxpayers to fix your mistakes for you.
- davidgerard 4y ago
  That rule already exists. It's Basel III, and SVB was one of those who lobbied to have it removed for particular US banks in 2018. As you well know. Here's the explainer for everyone else: https://archive.is/gmJxU https://archive.is/gmJxU
- nightmarish 4y ago
  [flagged]
kzz102 4y ago
It's truly remarkable that most likely SVB lobbied congress to allow more risk taking because it will encourages innovation, while in reality what it did destroys innovation.

nickpeterson 4y ago

I guess why didn’t you spread it around to multiple banks?

novalis78 4y ago
…which is what many crypto companies have had to do for a very long time… bank redundancy is crucial in an environment where innovation has stalled, regulations stifle and monopolies abound.

deleted 4y ago

[deleted]

delusional 4y ago

Are you arguing for the abolishment of private banking and erecting a government run banking institution in its place? because it sounds like that to me.

gameshot911 4y ago

You don't lose everything, only a percentage based on what the FDIC isn't able to recover after the sale of all assets. And - yes.

DennisP 4y ago
That process takes a long time. Most startups would be out of business by then.
- IncRnd 4y ago
  Just about everyone in the US who has a business bank account faces that same issue. There have been hundreds of bank failures before this. SVB account holders are not unique and probably won't get special treatment.
- beezle 4y ago
  Then they should have only kept the minimum funds necessary for transacting business in that bank account and kept the rest in short dated treasury bills at another institution(s). Part of being a company is having a treasury department to manage the cash flow needs, whether that is one person or ten.

echion 4y ago

> Are you saying if I deposit [...] I should just accept the impact [...] due to events unrelated to my actions and choices? You chose that bank and you chose to deposit more than $250,000. Are you saying the limit should be higher?

pixl97 4y ago
I mean when that limit was set 250k was a lot, but it really needs to be pegged to inflation.
- daviross 4y ago
  You mean 2009? The limit was 100k before then. I wouldn't be against pegging it to inflation, but that's still only moving it up to ~$330k.
- subsistence234 4y ago
  that limit was set in 2008. before that it was $100k

leipert 4y ago

I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? It hasn’t to be this situation, but if your accounts are flagged for fraud or someone hacks an account, aren’t you safer by distributing cash in multiple banks?

kibwen 4y ago
People keep saying 250k, but it's actually 500k for any account with two signatories, which a company should be trivially able to produce.
TuringNYC 4y ago
>I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? On the topic of FDIC insurance and startups... I'll put in a shameless plug for a startup I helped launch 20yrs ago: *Promontory Interfinancial Network" https://www.intrafi.com/solutions/depositors/ https://www.intrafi.com/solutions/depositors/ It was a startup them (now acquired), and created a bank deposit product "CDARS" which took customer deposits and distributed it across (k = N/<FDIC Limit) banks and kept the relationship as a single bank with a single account. Even cooler, as k other people did it at k other banks, the service would just swap deposits across all the banks. It was a super-cool and valuable product, and i'm proud to say I helped write the matching engine for it back in 2002. I realize this doesnt help startups with locked funds at SVB, but I'm pointing out -- there are options out there to have 100% FDIC insured safety for both individuals and startups.
dehrmann 4y ago
This workaround seems rather silly when it mostly applies to medium-sized businesses trying to get safe, stable bank accounts. FDIC coverage is too low for businesses.
- JohnFen 4y ago
  There are a number of mechanisms besides the FDIC that are commonly used for depositors of this scale. You can even buy your own insurance, if nothing else.

danny_taco 4y ago

And who do you expect to foot the bill to recover your money? There are ways to mitigate this risk and it's not the taxpayers problem you mismanage your assets.

nocoiner 4y ago

Look up CDARS. There are well known cash management strategies that solve for exactly this set of circumstances. I’m not really sure why taxpayers are supposed to backstop CFO competence? But to answer your question, yeah, I think the equity in a for-profit business takes the risks and rewards of capitalism as they come. If the owners didn’t want to lose the basis points by holding cash in CDARS or liked the interest paid by SVB (approximately twice the median of other financial institutions), they probably shouldn’t have been trying to pick up pennies in front of steamrollers or expecting taxpayers to save them from the consequences of that freely made decision. Capitalism, baby.

TuringNYC 4y ago
Awesome to hear about CDARS on this board. CDARS have only seemed valuable twice in my life (2008, and yesterday)...but that is how insurance-linked products are supposed to work. You only need them when you need them. But when you need them, it is darn good to have them.

mindcrime 4y ago

Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes. That's the way this works. Or you can choose whatever risk mitigation strategy you're comfortable with: spread your deposits across multiple institutions, buy Krugerrands and bury them in the backyard, purchase 3rd party insurance whatever.

DennisP 4y ago
People keep talking about buying third-party insurance for this but a quick google didn't turn up any mention of insurance like that. Could you link some?
- IncRnd 4y ago
  That's very odd, the entire first page was full of hits for me. What were you searching? Take a look at https://www.forbes.com/advisor/banking/ways-to-insure-excess-deposits/ https://www.forbes.com/advisor/banking/ways-to-insure-excess.... It explains several methods, including extra deposit insurance from CDARS, MaxSafe, Depositors Insurance Fund, etc. It also explains cash management accounts, credit union overflow, using multiple banks, and so forth. I can't help but think a good CFO or comptroller would be well aware of these.
  - DennisP 4y ago
    Yes, I'm aware that I can put money in multiple accounts, or get an account that spreads the money to multiple accounts for me. None of these are what I was responding to: the suggestion to "purchase 3rd party insurance." The closest in that article is DIF but even that isn't insurance you go and buy, it's another kind of special bank account available at DIF's member banks. As far as I can tell, you can't just go buy supplemental deposit insurance, but for some reason people keep suggesting that as something SVB's depositors should have done. (And as someone who's worked as the first employee of a startup, I can tell you it was while before we were able to get a CFO.)

IncRnd 4y ago

Are you saying that the more successful you are means that everyone else should cover your losses due to your banking relationships?

gigitrix 4y ago

You don't accept it, you deal with the regulators and FDIC and demand they release liquidity as soon as possible, which they are striving to do.

JohnFen 4y ago

If you deposit more than $250k, you absolutely should take actions to limit your risk to an acceptable level. There are myriad ways to do this. > I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? You should hedge against potential losses, yes, absolutely. You're knowingly taking a risk. Just like every other risk in business, you determine if you can take the hit if things fail, and if you can't you arrange a mechanism that will reduce the damage to a level where you can. It's just basic business management.

friend_and_foe 4y ago

Or, you should purchase private additional insurance, yes. It's not like it didn't say "covered up to $250,000" on the package, it's not like theyre the only bank in town, it's not like the FDIC was the only option.