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> People shouldn't need to pay attention to what their bank is doing. There's a really nice threshold for measuring this: if you have more cash than can be spr

> People shouldn't need to pay attention to what their bank is doing. There's a really nice threshold for measuring this: if you have more cash than can be spread conveniently amongst a number of banks such that those account balances do not exceed FDIC insurance limits, you do need to pay attention to what your bank is doing.

jlmorton 4y ago
I love how many here are suddenly pretending that every mid-sized business in America both can and should be able to perform a deep and ongoing due diligence of their bank, including I suppose various macro stress tests and Monte Carlo simulations, using the limited information available in public filings, and not only this, but that this absurdity is actually desirable. Please. This is not a serious argument.
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- justin66 4y ago
  That's exactly what I was advocating for. Clever of you to read between the lines like that.
- wpietri 4y ago
  If you have imagined an argument that is absurd, maybe that's more about what you're imagining than what people are thinking. You could say absolutely the same thing about buying stocks. By your logic, nobody should be allowed to buy stocks because it's just too darned complicated.
  - jlmorton 4y ago
    This is not the slam dunk analogy you think it is. Buying stocks is too darned complicated, which is why even the most astute, sophisticated hedge fund managers cannot beat an index fund on any significant timescale. Because even with all of the publicly-available information, and thorough analysis, you still cannot be sure what is happening internally at any particular company. Similarly, it is quite literally -- and I do mean this literally -- impossible for anyone to conduct a meaningful and ongoing analysis of their bank. This leaves basically three options: * Buy private insurance, which is a fool's errand, as there's no guarantee it would make you whole in the event of a major black swan event. * Split your account up into an absurd number of institutions. (You get FDIC insurance only per depositor, per account category, per institution. You can't open more accounts of the same category at the same institution). * Place all your money at one of the Systemically Important Banks, where you basically get unlimited insurance. Please explain what you thin the rational thing to do here is.
    - wpietri 4y ago
      Is that really your total understanding of treasury management? You believe all American companies do 1 of 3 things with their cash, and it's those things? Anyhow, yes, buying stocks is too complicated to be a sure thing. But rather than banning the process, we just make sure there are decent guardrails so the average Joe doesn't get too screwed and systemic risk is limited, and then we let people do a capitalism if they want, but on their own heads be it. And whole industries have risen up to help them do it. It's the same deal with banks. The government's job isn't to hold the hands of people trying to figure out what to do with their millions. It's to protect the small players from predation and limit systemic risk.
      - jlmorton 4y ago
        Please explain what you think the proper thing to do with 3 months working capital is.
        wpietri 4y ago
        No. I am not a professional in this field, so I'm not going to pretend to give one-size-fits-all prescriptions for something that is obviously complex and context specific. Instead, I will encourage all fellow founders and would-be founders that there are many things where they should just hire an expert. Like law, or regulatory compliance, or the best way to manage millions in cash.
throwawaysleep 4y ago
So every YC startup that raises a few million dollars now needs a bank stability analyst?
- wpietri 4y ago
  What if they had, say, an executive-level person who knew a lot about finance? One whose job was understanding money and what to do with it? Maybe an officer of finance. Heck, managing all the company's cash sounds pretty important if it's millions of dollars, so we should probably put them pretty high up. Some sort of C*O title? Just spitballing here, but since apparently a lot of people with millions of dollars who have heard their whole lives about FDIC-insured deposit limits are suddenly waking up to the fact that things above the line are uninsured, seems like a good time to innovate.
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  - jlmorton 4y ago
    Except no one thought the deposits were actually uninsured. Back in 2008, the FDIC launched the Transaction Account Guarantee Program to provide unlimited insurance to uninsured deposits in non-interest bearing accounts, and then later expanded to low interest accounts, on an emergency basis. This program protected nearly a trillion dollars in uninsured deposits, and made all of them whole. After Dodd-Frank, the program was ended. However, if the FDIC deems a situation to have systemic risks, it's within their statutory authority to do this again. And it now seems the Government is planning to do exactly that, should they be unable to find a buyer for SVB.
    - wpietri 4y ago
      Oh, "no one". Gosh golly, impressive how you can read minds like that. That program was an always-temporary response to a major financial crisis. I expect most finance professionals knew that it was temporary. But suppose you're right. Suppose all the cool kids thought they'd get bailed out no matter what. In that case, it's even more important now to not use taxpayer money to prevent the big-money SVB accountholders from taking a haircut. Because your justification here is exactly the kind of moral-hazard problem that regulators are very eager to prevent.

jlmorton 4y ago

I love how many here are suddenly pretending that every mid-sized business in America both can and should be able to perform a deep and ongoing due diligence of their bank, including I suppose various macro stress tests and Monte Carlo simulations, using the limited information available in public filings, and not only this, but that this absurdity is actually desirable. Please. This is not a serious argument.

deleted 4y ago
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deleted 4y ago
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justin66 4y ago
That's exactly what I was advocating for. Clever of you to read between the lines like that.
wpietri 4y ago
If you have imagined an argument that is absurd, maybe that's more about what you're imagining than what people are thinking. You could say absolutely the same thing about buying stocks. By your logic, nobody should be allowed to buy stocks because it's just too darned complicated.
- jlmorton 4y ago
  This is not the slam dunk analogy you think it is. Buying stocks is too darned complicated, which is why even the most astute, sophisticated hedge fund managers cannot beat an index fund on any significant timescale. Because even with all of the publicly-available information, and thorough analysis, you still cannot be sure what is happening internally at any particular company. Similarly, it is quite literally -- and I do mean this literally -- impossible for anyone to conduct a meaningful and ongoing analysis of their bank. This leaves basically three options: * Buy private insurance, which is a fool's errand, as there's no guarantee it would make you whole in the event of a major black swan event. * Split your account up into an absurd number of institutions. (You get FDIC insurance only per depositor, per account category, per institution. You can't open more accounts of the same category at the same institution). * Place all your money at one of the Systemically Important Banks, where you basically get unlimited insurance. Please explain what you thin the rational thing to do here is.
  - wpietri 4y ago
    Is that really your total understanding of treasury management? You believe all American companies do 1 of 3 things with their cash, and it's those things? Anyhow, yes, buying stocks is too complicated to be a sure thing. But rather than banning the process, we just make sure there are decent guardrails so the average Joe doesn't get too screwed and systemic risk is limited, and then we let people do a capitalism if they want, but on their own heads be it. And whole industries have risen up to help them do it. It's the same deal with banks. The government's job isn't to hold the hands of people trying to figure out what to do with their millions. It's to protect the small players from predation and limit systemic risk.
    - jlmorton 4y ago
      Please explain what you think the proper thing to do with 3 months working capital is.
      - wpietri 4y ago
        No. I am not a professional in this field, so I'm not going to pretend to give one-size-fits-all prescriptions for something that is obviously complex and context specific. Instead, I will encourage all fellow founders and would-be founders that there are many things where they should just hire an expert. Like law, or regulatory compliance, or the best way to manage millions in cash.

throwawaysleep 4y ago

So every YC startup that raises a few million dollars now needs a bank stability analyst?

wpietri 4y ago
What if they had, say, an executive-level person who knew a lot about finance? One whose job was understanding money and what to do with it? Maybe an officer of finance. Heck, managing all the company's cash sounds pretty important if it's millions of dollars, so we should probably put them pretty high up. Some sort of C*O title? Just spitballing here, but since apparently a lot of people with millions of dollars who have heard their whole lives about FDIC-insured deposit limits are suddenly waking up to the fact that things above the line are uninsured, seems like a good time to innovate.
- deleted 4y ago
  [deleted]
- jlmorton 4y ago
  Except no one thought the deposits were actually uninsured. Back in 2008, the FDIC launched the Transaction Account Guarantee Program to provide unlimited insurance to uninsured deposits in non-interest bearing accounts, and then later expanded to low interest accounts, on an emergency basis. This program protected nearly a trillion dollars in uninsured deposits, and made all of them whole. After Dodd-Frank, the program was ended. However, if the FDIC deems a situation to have systemic risks, it's within their statutory authority to do this again. And it now seems the Government is planning to do exactly that, should they be unable to find a buyer for SVB.
  - wpietri 4y ago
    Oh, "no one". Gosh golly, impressive how you can read minds like that. That program was an always-temporary response to a major financial crisis. I expect most finance professionals knew that it was temporary. But suppose you're right. Suppose all the cool kids thought they'd get bailed out no matter what. In that case, it's even more important now to not use taxpayer money to prevent the big-money SVB accountholders from taking a haircut. Because your justification here is exactly the kind of moral-hazard problem that regulators are very eager to prevent.