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I just don’t understand how none of the 5000 banks in USA haven’t renamed themselves as “safe bank” and promises to only invest in t-bills or maybe just floatin

I just don’t understand how none of the 5000 banks in USA haven’t renamed themselves as “safe bank” and promises to only invest in t-bills or maybe just floating rate low-ltv loans. That’s great for entities finding themselves with millions in their checking account. Interest rates would suck, but that’s the price you pay for insurance. Anyone chasing higher rates or pricier customer service (or going with whichever bank blows their budget on marketing) is playing with fire.

ummonk 4y ago
Why would they be any safer than the too-big-to-fail megabanks?
- Scoundreller 4y ago
  because they're not taking the same risks, but yeah, if there are banks that can take risks while someone else bailouts any losses from those decisions, then yeah, I get going with the latter.
dmurray 4y ago
As recently as 1 year ago, the fed funds rate was 0.2%, which isn't enough to pay the overheads of a bank. Banks don't move fast enough to reinvent their whole business and churn their whole portfolio into T-bills on that time scale, and take too long-term a view for "let's just shutter the business when rates go back to zero" to be a business model they will consider. Having a single product - a single account type that is backed by T-bills - is not something regulators will allow a bank to do: all deposit accounts has to be backed by the bank as a whole. However, there are non-banking businesses that don't have these constraints, and some of them are doing exactly what you suggest. They are called money market funds and business is great for them right now. You can get the returns and safety of short term Treasuries in return for foregoing other services your bank provides (physical branches, credit cards) and accepting a minor liquidity risk that the fund could pause withdrawals.
- Scoundreller 4y ago
  > As recently as 1 year ago, the fed funds rate was 0.2%, which isn't enough to pay the overheads of a bank. Then you charge negative rates or monthly fees

ummonk 4y ago

Why would they be any safer than the too-big-to-fail megabanks?

Scoundreller 4y ago
because they're not taking the same risks, but yeah, if there are banks that can take risks while someone else bailouts any losses from those decisions, then yeah, I get going with the latter.

dmurray 4y ago

As recently as 1 year ago, the fed funds rate was 0.2%, which isn't enough to pay the overheads of a bank. Banks don't move fast enough to reinvent their whole business and churn their whole portfolio into T-bills on that time scale, and take too long-term a view for "let's just shutter the business when rates go back to zero" to be a business model they will consider. Having a single product - a single account type that is backed by T-bills - is not something regulators will allow a bank to do: all deposit accounts has to be backed by the bank as a whole. However, there are non-banking businesses that don't have these constraints, and some of them are doing exactly what you suggest. They are called money market funds and business is great for them right now. You can get the returns and safety of short term Treasuries in return for foregoing other services your bank provides (physical branches, credit cards) and accepting a minor liquidity risk that the fund could pause withdrawals.

Scoundreller 4y ago
> As recently as 1 year ago, the fed funds rate was 0.2%, which isn't enough to pay the overheads of a bank. Then you charge negative rates or monthly fees