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It’s simply unrealistic for businesses to not exceed the $250k insurance limit.
by hoytschermerhrn 4y ago
It’s simply unrealistic for businesses to not exceed the $250k insurance limit.
- deleted 4y ago[deleted]
- gameshot911 4y agoYou can buy insurance to protect amounts above $250k.
- AH4oFVbPT4f8 4y agoExactly this, take out insurance, open additional accounts so that the companies livelihood is not dependent on a single bank. What about all the companies who funded all these 'companies' ? Why aren't they stepping in to clean up the mess?
- avalys 4y agoAnd who ensures that the insurance company has enough capital to pay out on that insurance?
- deleted 4y ago[deleted]
- consumer451 4y agoI had no idea that was an option. My google-fu is failing me, what is that called? Who are the providers? Seems like it would be a mega capital intensive insurance product. edit: this is way out of my wheelhouse, so an actual answer would be educational.
- Kortaggio 4y agoThe term to google for is "insured cash sweep", but the specifics depend on the particular financial institution you work with. Instead of a single insurance provider, your cash is sharded behind the scenes among many member institutions. Here's one bank I picked at random from Google[0]. Brokerages like Schwab[1] and IBKR[2] also have a private insurer (both use Lloyd's of London) they offer as a service to customers. [0] https://www.stearnsbank.com/personal/high-balance-deposit https://www.stearnsbank.com/personal/high-balance-deposit [1] https://www.schwab.com/legal/sipc-account-protection https://www.schwab.com/legal/sipc-account-protection [2] https://ibkr.info/node/2012 https://ibkr.info/node/2012
- consumer451 4y agoThanks for pointing me to this!
- spiralx 4y agoTry searching for "reinsurance" as in insurance for insurance, Swiss Re and Lloyds of London are the two big names I can think of, I don't know much other than that.
- ummonk 4y agoThat just moves the source of risk to the company selling you that insurance. If they go under as well, then that insurance is worthless.
- tomp 4y agoWhich insurance company can pay out a $40bn risk event?
- denton-scratch 4y agoLloyds of London?
- trogdor 4y agoWhen Lehman Brothers collapsed, the associated insurance payouts totaled ~$100 billion.
- joshuamorton 4y agoReinsurance literally exists for this purpose. It's what Berkshire Hathaway does, for example.
- anticensor 4y agoYou can only reinsure so many times before you arrive in the central bank.
- christophilus 4y agoBerkshire Hathaway could. They probably wouldn’t have insured SVB, though.
- noelsusman 4y agoWe solved this problem decades ago, these businesses chose not to use the tools available to them to protect their money. https://www.intrafinetworkdeposits.com/ https://www.intrafinetworkdeposits.com/
- junofan 4y agoIt’s silly. Either way, the money’s coming from the insurance fund. FDIC claims insurance is “at least” 250k.
- ericpauley 4y agoThe point is that diversifying deposits across banks reduces the risk of failures happening in the first place, reducing FDIC payouts. This incentive structure completely breaks down if there's no cap.
- eropple 4y agoBoth insured sweep accounts and non-FDIC depository insurance exist.