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This applies individual-person logic to a company. Maybe a person can have a bunch of separate $200k accounts, but it would be strange for a company to do that.
by FooBarBizBazz 4y ago
This applies individual-person logic to a company. Maybe a person can have a bunch of separate $200k accounts, but it would be strange for a company to do that. If you have a dozen engineers, that's just one month's payroll. I would expect a company to have some buffer in its bank account, not to have literally 100% laddered rigidly in T-bills.
This also doesn't reflect on the fitness of the companies in question. If you're starting a software company, you should be able to go to the bank and it should Just Work. If it doesn't, that's the bank's fault, not yours. You shouldn't have to think about the average duration of the bank's bond portfolio, or about how many interest-rate swaps it has on the books. That responsibility and risk should go with the bank. That's their role.
- kelseyfrog 4y agoOk, for one strange and legal are different axes, and companies are only constrained by what is legal. They have no reservations about the strange. Secondly, what a person or company thinks should happen bears no actual relation to what actually does happen. Why should we start giving credit to misconceptions? This is on par with someone arguing that it's ok to distribute copyrighted property for free because no one made any money on it and when confronted with the legal reality that the courts don't care, pleading, "but thats the way it should just work." Sorry, but that's doesn't reflect the reality of the terms of the banking arrangement. Excesses of 250k are not insured. There's a lot of things I think should just work, but using that as a justification is beyond logic.
- bobby_bbb 4y agoThere are insuring agreements that can cover this kind of risk. It ought to be a part of any risk-management program.