4 ms·

If you had a payroll to make this month and only had that much in cash on hand, you were already a marginal business and a gust of wind could have knocked you o

If you had a payroll to make this month and only had that much in cash on hand, you were already a marginal business and a gust of wind could have knocked you out. Your bank failing was that gust of wind. You’ll definitely get up to $250k back soon and probably more, and hopefully you can sort out the disruption and find a way to carry on. If, on the other hand, you had a lot more cash on hand but parked it all as uninsured deposits in one bank, you should be screaming at whatever mentor told you that was a reasonable thing to do. Either your mentor was a hack with little financial experience or they were conniving against taxpayers and believed bailouts would magically come to their rescue and remediate well-known tail risk. Somebody done you wrong, kid. Take it up with them, not the rest of us.

zarzavat 4y ago
The root cause of all of this is that the US is so corrupt that a large bank was able to exempt itself from international banking standards. So it really is “the rest of us” who are to blame, by passively accepting corruption and feckless regulators. Taxpayers should pay the bill, it might incentivize them to get off their ass for once.
- ClumsyPilot 4y ago
  > Taxpayers should pay the bill, it might incentivize them to get off their ass for once like they did in 2008? I would rather pay off student loans
  - jayparth 4y ago
    What happened in 2008? I was very young then so I don’t know.
    - paranoidrobot 4y ago
      The Global Financial Crisis. https://en.wikipedia.org/wiki/2007%E2%80%932008_financial_crisis https://en.wikipedia.org/wiki/2007%E2%80%932008_financial_cr...
    - mijkal 4y ago
      The US plunged into the worst recession since The Great Depression of the 1930s when Lehman Brothers bank collapsed, which quickly cascaded around the world. 2008 is aka 'The Great Recession'; it likely would have been much worse without govt intervention, though the targets of the help were corporations, not the average person affected by it. The 2008 crash was the culmination of a house of cards largely enabled by deregulation that wiped out huge mainstays in America, including the auto industry. GM and Chrysler are only with us today because of massive govt bailouts. Many banks large and small failed and were absorbed into larger ones (eg Washington Mutual). The govt bailed out other banks deemed 'too big to fail' (eg Chase). Countries were also failing over this (eg Greece, which used the euro hence was not a sovereign currency issuer and had to rely on Germany et al to assist). Severe govt spending cuts were imposed around the world, leaving the average citizen bearing the brunt of the downturn. None of the criminal bankers that caused this crash were held criminally or civilly accountable, sparking the Occupy protests. In fact, they still got their big bonuses that taxpayers paid for. Meanwhile, average people lost their homes, businesses, and jobs. It took about a decade to return to pre-crash economic levels. Not counting 9/11 (the effects of which changed the trajectory of modern life), this was the first 'once in a lifetime' shock for Millennials that set us back many years … just in time for a global pandemic. There are some movies about the 2008 crash. Maybe checkout 'Margin Call'.
    - Symbiote 4y ago
      https://en.wikipedia.org/wiki/2008 https://en.wikipedia.org/wiki/2008
ithkuil 4y ago
I'm a complete ignoramus in this field, so this is a honest question. Please ELI5: Is $250k a fixed limit for insured deposits? If your company needs more than $250k to meet a month of payroll, is it advised that you have accounts in multiple banks so that you have the necessary liquidity guaranteed as insured deposits? (E.g. if you need a million you'd need 4 different banks, if you need 5 million you need 20 different banks?) Or can you pay some extra insurance in order to get the required protection without the operational hassle of having to deal with multiple banks? Or is it the logic that you need to protect from bank runs to one (or two) of your banks and assume that the others will stay solvent?
- nmhancoc 4y ago
  > Is $250k a fixed limit for insured deposits? If your company needs more than $250k to meet a month of payroll, is it advised that you have accounts in multiple banks so that you have the necessary liquidity guaranteed as insured deposits? (E.g. if you need a million you'd need 4 different banks, if you need 5 million you need 20 different banks?) That is an option, yes. You can also automate it through a couple different ways. Some are third party brokers who then deposits it across multiple institutions keeping each balance below $250k, others are banks that have agreements between each other to share deposits such that the deposit at each institution is below the limit. For an example of the latter, https://www.intrafinetworkdeposits.com/find-intrafi-network-deposits/ https://www.intrafinetworkdeposits.com/find-intrafi-network-... > Or can you pay some extra insurance in order to get the required protection without the operational hassle of having to deal with multiple banks? The above deals with the operational hassle but you can also directly insure deposits. The most direct way is the Depositors Insurance Fund, which is run out of Massachusetts and has some participating banks. Incidentally, really large companies like GM or Toyota, fund their payroll through the commercial paper market. As a result they don’t have the large balances you’re imagining sitting around in bank accounts for a monthly withdrawal. These sorts of notes actually occupy a fun place in the history of the development of currency, but that’s off topic.
  - ithkuil 4y ago
    Thanks! So where is the catch? According to https://www.ycombinator.com/blog/urgent-sign-the-petition-now-thousands-of-startups-and-hundreds-of-thousands-of-startup-jobs-are-at-risk https://www.ycombinator.com/blog/urgent-sign-the-petition-no... > In the Y Combinator community, one-third of startups with exposure to SVB used SVB as their sole bank account Why did so many startups end up in that situation? Is doing things properly too expensive? Or just requires hiring an expert? Hubris? (won't happen ever), calculated risk? (Among the many things that can go wrong in a early startup life, the bank going bust is the last worry)

zarzavat 4y ago

The root cause of all of this is that the US is so corrupt that a large bank was able to exempt itself from international banking standards. So it really is “the rest of us” who are to blame, by passively accepting corruption and feckless regulators. Taxpayers should pay the bill, it might incentivize them to get off their ass for once.

ClumsyPilot 4y ago
> Taxpayers should pay the bill, it might incentivize them to get off their ass for once like they did in 2008? I would rather pay off student loans
- jayparth 4y ago
  What happened in 2008? I was very young then so I don’t know.
  - paranoidrobot 4y ago
    The Global Financial Crisis. https://en.wikipedia.org/wiki/2007%E2%80%932008_financial_crisis https://en.wikipedia.org/wiki/2007%E2%80%932008_financial_cr...
  - mijkal 4y ago
    The US plunged into the worst recession since The Great Depression of the 1930s when Lehman Brothers bank collapsed, which quickly cascaded around the world. 2008 is aka 'The Great Recession'; it likely would have been much worse without govt intervention, though the targets of the help were corporations, not the average person affected by it. The 2008 crash was the culmination of a house of cards largely enabled by deregulation that wiped out huge mainstays in America, including the auto industry. GM and Chrysler are only with us today because of massive govt bailouts. Many banks large and small failed and were absorbed into larger ones (eg Washington Mutual). The govt bailed out other banks deemed 'too big to fail' (eg Chase). Countries were also failing over this (eg Greece, which used the euro hence was not a sovereign currency issuer and had to rely on Germany et al to assist). Severe govt spending cuts were imposed around the world, leaving the average citizen bearing the brunt of the downturn. None of the criminal bankers that caused this crash were held criminally or civilly accountable, sparking the Occupy protests. In fact, they still got their big bonuses that taxpayers paid for. Meanwhile, average people lost their homes, businesses, and jobs. It took about a decade to return to pre-crash economic levels. Not counting 9/11 (the effects of which changed the trajectory of modern life), this was the first 'once in a lifetime' shock for Millennials that set us back many years … just in time for a global pandemic. There are some movies about the 2008 crash. Maybe checkout 'Margin Call'.
  - Symbiote 4y ago
    https://en.wikipedia.org/wiki/2008 https://en.wikipedia.org/wiki/2008

ithkuil 4y ago

I'm a complete ignoramus in this field, so this is a honest question. Please ELI5: Is $250k a fixed limit for insured deposits? If your company needs more than $250k to meet a month of payroll, is it advised that you have accounts in multiple banks so that you have the necessary liquidity guaranteed as insured deposits? (E.g. if you need a million you'd need 4 different banks, if you need 5 million you need 20 different banks?) Or can you pay some extra insurance in order to get the required protection without the operational hassle of having to deal with multiple banks? Or is it the logic that you need to protect from bank runs to one (or two) of your banks and assume that the others will stay solvent?

nmhancoc 4y ago
> Is $250k a fixed limit for insured deposits? If your company needs more than $250k to meet a month of payroll, is it advised that you have accounts in multiple banks so that you have the necessary liquidity guaranteed as insured deposits? (E.g. if you need a million you'd need 4 different banks, if you need 5 million you need 20 different banks?) That is an option, yes. You can also automate it through a couple different ways. Some are third party brokers who then deposits it across multiple institutions keeping each balance below $250k, others are banks that have agreements between each other to share deposits such that the deposit at each institution is below the limit. For an example of the latter, https://www.intrafinetworkdeposits.com/find-intrafi-network-deposits/ https://www.intrafinetworkdeposits.com/find-intrafi-network-... > Or can you pay some extra insurance in order to get the required protection without the operational hassle of having to deal with multiple banks? The above deals with the operational hassle but you can also directly insure deposits. The most direct way is the Depositors Insurance Fund, which is run out of Massachusetts and has some participating banks. Incidentally, really large companies like GM or Toyota, fund their payroll through the commercial paper market. As a result they don’t have the large balances you’re imagining sitting around in bank accounts for a monthly withdrawal. These sorts of notes actually occupy a fun place in the history of the development of currency, but that’s off topic.
- ithkuil 4y ago
  Thanks! So where is the catch? According to https://www.ycombinator.com/blog/urgent-sign-the-petition-now-thousands-of-startups-and-hundreds-of-thousands-of-startup-jobs-are-at-risk https://www.ycombinator.com/blog/urgent-sign-the-petition-no... > In the Y Combinator community, one-third of startups with exposure to SVB used SVB as their sole bank account Why did so many startups end up in that situation? Is doing things properly too expensive? Or just requires hiring an expert? Hubris? (won't happen ever), calculated risk? (Among the many things that can go wrong in a early startup life, the bank going bust is the last worry)