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What do we expect small businesses to even do with their cash? It's conceivable that many of them have more than $250k for payroll at any given time. Without a
by flerchin 4y ago
What do we expect small businesses to even do with their cash? It's conceivable that many of them have more than $250k for payroll at any given time.
Without a solution, we run a bank run risk _at all times_. This seems untenable. Perhaps we should raise the limit to quite a bit higher, and charge large account holders for that?
- nielsbot 4y agoFrom the news I've been hearing recently, I think the idea is that you use a sweep account/purchase overnight bonds from the fed so that your deposits leave the bank every night and are put back the following day. So you're covered in case of a bank failure. (Banks are already charged for the current insurance up to $250K)
- flerchin 4y agoInteresting. Is that a service banks offer? I suppose that it would mean that the bank truly could not lend against deposits that use this mechanism, so I wonder how much they would charge for this.
- johnrgrace 4y agoYes banks offer this through a network with others banks,and they have reciprocity so if I puts $250k in another members bank they put $250k in my bank so the members banks don't really "lose" deposits. Net, the deposits can be used by the bank in the same way they usually are. A sweep account is a very common business account and most banks offer this, if you don't pick it based on your balances they'll call you up and try and sell you this service. SVB strangely did not have this product for some reason.
- zamnos 4y agoI don't know about banks but eg Wealthfront will do that for you and give you 4.3% APY on cash! https://www.wealthfront.com/cash-account-participant-banks https://www.wealthfront.com/cash-account-participant-banks