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Isn’t Goldman Sachs actually handling that money?

slg 3y ago
Yes, but it is still Apple's brand on the line. Which of the following has higher odds? 1. GS going under and Apple bails out its customers who hold these accounts. 2. GS going under and the US government bails out everyone. Both are as close to 100% that this conversation is effectively meaningless. I just think it is an interesting hypothetical.
- chimeracoder 3y ago
  > Both are as close to 100% that this conversation is effectively meaningless. I just think it is an interesting hypothetical. The first has almost 0% chance of happening. Apple will never bail out its customers for insured deposits, as that money is guaranteed by the FDIC. Why would they effectively "donate" money for free to the FDIC? The only universe in which that happens is the one in which the FDIC somehow is insolvent and the federal government abandons the FDIC and the cascading effects of the latter (which would almost certainly create a national if not global financial crisis that makes 2008 look quaint) somehow don't affect Apple enough that they could use their additional cash on hand to pay their entire banking liabilities. Which is pretty unlikely, given that most non-banking companies don't have cash reserves that large that they can dip into at a moment's notice. Even Apple, the world's biggest company, has "only" $50B in cash on hand as of last quarter, which sounds like a lot but would not be enough to weather that kind of a crisis and still be able to make depositors whole even if they felt that it was their responsibility.
  - slg 3y ago
    >The first has almost 0% chance of happening. Apple will never bail out its customers for insured deposits, as that money is guaranteed by the FDIC. Why would they effectively "donate" money for free to the FDIC? Yes, this was a hypothetical based on a situation in which these accounts weren't protected by FDIC, either by design or some problem with the FDIC. Apple isn't going to donate money to the federal government. But I could see it donating money to its customers as an attempt to retain the value of its brand. >The only universe in which that happens is the one in which the FDIC somehow is insolvent and the federal government abandons the FDIC and the cascading effects of the latter (which would almost certainly create a national if not global financial crisis that makes 2008 look quaint) somehow don't affect Apple enough that they could use their additional cash on hand to pay their entire banking liabilities. Which is pretty unlikely, given that most non-banking companies don't have cash reserves that large that they can dip into at a moment's notice. Even Apple, the world's biggest company, has "only" $50B in cash on hand as of last quarter, which sounds like a lot but would not be enough to weather that kind of a crisis and still be able to make depositors whole even if they felt that it was their responsibility. The FDIC might not have the money to cover a failure as big as Goldman Sachs and the cascading effects (a quick Google search says the FDIC has $128b in the insurance fund and GS has $110b in consumer deposits, so it seems close at the moment). The big question is what would the US government do in response to a failure this big. Would a polarized and split Congress want to or even be able to compromise on a rescue plan? What if the issue is specifically at Goldman Sachs due to corruption or some other crime rather than an issue with the overall economic environment? Like I said, the odds of this situation are extremely low, but so are the odds of Apple accepting the destruction of their brand.
  - philistine 3y ago
    This sounds like the type of situation where money becomes worthless. An asteroid the size of Texas just fell into the Pacific? What will happen to my FDIC insured funds!?
    - chimeracoder 3y ago
      > This sounds like the type of situation where money becomes worthless. An asteroid the size of Texas just fell into the Pacific? What will happen to my FDIC insured funds!? Yeah, I would be more worried about the USD itself becoming unstable than about the FDIC not paying out insured deposits. And at that point, Apple would have far bigger concerns than the brand risk of people losing their Goldman-held savings.

slg 3y ago

Yes, but it is still Apple's brand on the line. Which of the following has higher odds? 1. GS going under and Apple bails out its customers who hold these accounts. 2. GS going under and the US government bails out everyone. Both are as close to 100% that this conversation is effectively meaningless. I just think it is an interesting hypothetical.

chimeracoder 3y ago
> Both are as close to 100% that this conversation is effectively meaningless. I just think it is an interesting hypothetical. The first has almost 0% chance of happening. Apple will never bail out its customers for insured deposits, as that money is guaranteed by the FDIC. Why would they effectively "donate" money for free to the FDIC? The only universe in which that happens is the one in which the FDIC somehow is insolvent and the federal government abandons the FDIC and the cascading effects of the latter (which would almost certainly create a national if not global financial crisis that makes 2008 look quaint) somehow don't affect Apple enough that they could use their additional cash on hand to pay their entire banking liabilities. Which is pretty unlikely, given that most non-banking companies don't have cash reserves that large that they can dip into at a moment's notice. Even Apple, the world's biggest company, has "only" $50B in cash on hand as of last quarter, which sounds like a lot but would not be enough to weather that kind of a crisis and still be able to make depositors whole even if they felt that it was their responsibility.
- slg 3y ago
  >The first has almost 0% chance of happening. Apple will never bail out its customers for insured deposits, as that money is guaranteed by the FDIC. Why would they effectively "donate" money for free to the FDIC? Yes, this was a hypothetical based on a situation in which these accounts weren't protected by FDIC, either by design or some problem with the FDIC. Apple isn't going to donate money to the federal government. But I could see it donating money to its customers as an attempt to retain the value of its brand. >The only universe in which that happens is the one in which the FDIC somehow is insolvent and the federal government abandons the FDIC and the cascading effects of the latter (which would almost certainly create a national if not global financial crisis that makes 2008 look quaint) somehow don't affect Apple enough that they could use their additional cash on hand to pay their entire banking liabilities. Which is pretty unlikely, given that most non-banking companies don't have cash reserves that large that they can dip into at a moment's notice. Even Apple, the world's biggest company, has "only" $50B in cash on hand as of last quarter, which sounds like a lot but would not be enough to weather that kind of a crisis and still be able to make depositors whole even if they felt that it was their responsibility. The FDIC might not have the money to cover a failure as big as Goldman Sachs and the cascading effects (a quick Google search says the FDIC has $128b in the insurance fund and GS has $110b in consumer deposits, so it seems close at the moment). The big question is what would the US government do in response to a failure this big. Would a polarized and split Congress want to or even be able to compromise on a rescue plan? What if the issue is specifically at Goldman Sachs due to corruption or some other crime rather than an issue with the overall economic environment? Like I said, the odds of this situation are extremely low, but so are the odds of Apple accepting the destruction of their brand.
- philistine 3y ago
  This sounds like the type of situation where money becomes worthless. An asteroid the size of Texas just fell into the Pacific? What will happen to my FDIC insured funds!?
  - chimeracoder 3y ago
    > This sounds like the type of situation where money becomes worthless. An asteroid the size of Texas just fell into the Pacific? What will happen to my FDIC insured funds!? Yeah, I would be more worried about the USD itself becoming unstable than about the FDIC not paying out insured deposits. And at that point, Apple would have far bigger concerns than the brand risk of people losing their Goldman-held savings.