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The issue with keeping money in the bank isn’t that the money is uninsured. The issue is that the money is uninsured and the bank is insolvent. Money market fun
by rcme 4y ago
The issue with keeping money in the bank isn’t that the money is uninsured. The issue is that the money is uninsured and the bank is insolvent. Money market funds aren’t insolvent.
- lowkey 4y agoAnother issue is that the FDIC insurance fund currently holds $148 Billion to protect over $17 Trillion in deposits. Where does the money come from if 0.8% insurance coverage ratio is insufficient in the event of a crisis? More money printing? More inflation?
- cm2187 4y agoMoney market funds buy banks CDs and CPs.
- rcme 4y agoSome do, many don't. E.g. VMFXX holds government-backed debt: https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx#portfolio-composition https://investor.vanguard.com/investment-products/mutual-fun...
- DebtDeflation 4y agoSo does SVB. Holding Treasuries is no guarantee of solvency when their maturities are out in the future and suddenly half your depositors want to withdraw their funds today.
- sir0010010 4y agoIf you click on the link for VMFXX, it says that the average maturity of the US treasury debt that it holds is 13 days. The average maturity for SVB's treasury holdings, on the other hand, was more than 6 years.