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I say as a person who’s been laid off twice and worked for a company that went bankrupt — why is that my problem? Why should you get my money? (In the case of

by JackFr 4y ago

I say as a person who’s been laid off twice and worked for a company that went bankrupt — why is that my problem? Why should you get my money? (In the case of the company I worked for which went bankrupt — we were a fintech startup with a truly innovative and fantastic product. Our management made three bad decisions which led to our demise. Two were technical and would have been recoverable, the last was a strategic move which ultimately proved disastrous.)

ordinaryradical 4y ago
Because you don’t make depositors responsible for banks’ mismanagement unless you intend to create a depression. Are you truly proposing that every time a bank fails we make everyone who kept money there take the hit? A return to the 1920s, eh?
- ryanwaggoner 4y ago
  Why do you think the FDIC insurance limit is $250k instead of $250mm, or infinite?
  - ordinaryradical 4y ago
    I will answer and you can answer this question: Why is the government involved beyond that limit in this case? Could it be they want to give the average person peace of mind while retaining the flexibility to handle a restructuring however they deem best?
    - freeone3000 4y ago
      Because the bank continues to have assets, and those assets will be dispersed to cover depositors.
  - paulclinger 4y ago
    It's because there is a cost associated with this insurance. It's not a bottomless pit of money, as FDIC pays out using the funds it collects from the participant banks and receives no funding from the government (https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation#Funds https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...). I think it should be possible for the bank to get better coverage, but they should be paying much larger premium if they want insurance up to 250mm instead of 250k. I also think that similar to "FDIC insured" labels in bank branches, FDIC should require posting "13% of deposits are FDIC insured" to help assess risk for those clients that have uninsured funds.
rmilk 4y ago
Exactly. I got a letter from my last startup Thu at 11pm telling us they had no cash for payroll tomorrow and we were all laid off. Poor planning along with super-lean cash flow broke my employer. This is no different. For example, how many business checking accounts are backed by money market funds to get a little interest on them? Clearly states in offerings that rates aren’t guaranteed and you could even lose capital. Same with the $250k FDIC limit - clear risk with zero forethought from these employers of hedging it with lines of credit, payroll/business continuity insurance, etc. Those are things “slow” companies do, not move fast and break things companies do (sarcasm intended - I have worked in R&D in both types multiple times).

by JackFr 4y ago

ordinaryradical 4y ago

Because you don’t make depositors responsible for banks’ mismanagement unless you intend to create a depression. Are you truly proposing that every time a bank fails we make everyone who kept money there take the hit? A return to the 1920s, eh?

ryanwaggoner 4y ago
Why do you think the FDIC insurance limit is $250k instead of $250mm, or infinite?
- ordinaryradical 4y ago
  I will answer and you can answer this question: Why is the government involved beyond that limit in this case? Could it be they want to give the average person peace of mind while retaining the flexibility to handle a restructuring however they deem best?
  - freeone3000 4y ago
    Because the bank continues to have assets, and those assets will be dispersed to cover depositors.
- paulclinger 4y ago
  It's because there is a cost associated with this insurance. It's not a bottomless pit of money, as FDIC pays out using the funds it collects from the participant banks and receives no funding from the government (https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation#Funds https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...). I think it should be possible for the bank to get better coverage, but they should be paying much larger premium if they want insurance up to 250mm instead of 250k. I also think that similar to "FDIC insured" labels in bank branches, FDIC should require posting "13% of deposits are FDIC insured" to help assess risk for those clients that have uninsured funds.

rmilk 4y ago

Exactly. I got a letter from my last startup Thu at 11pm telling us they had no cash for payroll tomorrow and we were all laid off. Poor planning along with super-lean cash flow broke my employer. This is no different. For example, how many business checking accounts are backed by money market funds to get a little interest on them? Clearly states in offerings that rates aren’t guaranteed and you could even lose capital. Same with the $250k FDIC limit - clear risk with zero forethought from these employers of hedging it with lines of credit, payroll/business continuity insurance, etc. Those are things “slow” companies do, not move fast and break things companies do (sarcasm intended - I have worked in R&D in both types multiple times).