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> Does this trigger the FDIC to step in? Was Synapse FDIC insured or just the underlying banks? Wouldn’t FDIC insurance only cover $250K in each bank account i

> Does this trigger the FDIC to step in? Was Synapse FDIC insured or just the underlying banks? Wouldn’t FDIC insurance only cover $250K in each bank account if the bank went under? In this case it’s the service people used to put money (or the service the service used) into those accounts that’s gone bust with poor or no record of where people’s money has gone. > Or is synapse "shadow banking" gone wrong? Yes! Remembering where and how much customer money has gone is regulated banking 101

SOLAR_FIELDS 2y ago
In theory FDIC only covers the $250k but in recent years these bank wrappers have gotten a little bit more clever and abstracted it away by distributing holdings across multiple partner bank accounts: https://www.getevolved.com/openbanking/fdic-insured-sweep-program/fdic-mercury/ https://www.getevolved.com/openbanking/fdic-insured-sweep-pr... Mercury is the provider I know who does this (in partnership with Evolve, as the link indicates) but I think there are others as well.
- hodgesrm 2y ago
  Brex does it as well. At one point last year during the SVB meltdown they claimed to be doing sweeps across 9 Partner Banks. It sounds good but I find the disclosure pretty opaque. [0] We keep our funds diversified in several banks at this point to be sure. https://www.brex.com/legal/brex-cash-sweep-disclosure https://www.brex.com/legal/brex-cash-sweep-disclosure
toast0 2y ago
> Wouldn’t FDIC insurance only cover $250K in each bank account if the bank went under? The limit isn't per account; from the FDIC website: > The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. A properly notated pooled account should confer FDIC insurance to the underlying depositors. But if the intermediary doesn't properly notate the underlying accounts at the bank, or doesn't send all of your money to the underlying bank, FDIC insurance doesn't cover that. And you won't have statements from the insured bank to verify that the money is there either. There's a FDIC document specifically about these kinds of pooled accounts: https://www.fdic.gov/deposit/diguidebankers/documents/fiduciary-accounts.pdf https://www.fdic.gov/deposit/diguidebankers/documents/fiduci...

SOLAR_FIELDS 2y ago

In theory FDIC only covers the $250k but in recent years these bank wrappers have gotten a little bit more clever and abstracted it away by distributing holdings across multiple partner bank accounts: https://www.getevolved.com/openbanking/fdic-insured-sweep-program/fdic-mercury/ https://www.getevolved.com/openbanking/fdic-insured-sweep-pr... Mercury is the provider I know who does this (in partnership with Evolve, as the link indicates) but I think there are others as well.

hodgesrm 2y ago
Brex does it as well. At one point last year during the SVB meltdown they claimed to be doing sweeps across 9 Partner Banks. It sounds good but I find the disclosure pretty opaque. [0] We keep our funds diversified in several banks at this point to be sure. https://www.brex.com/legal/brex-cash-sweep-disclosure https://www.brex.com/legal/brex-cash-sweep-disclosure

toast0 2y ago

> Wouldn’t FDIC insurance only cover $250K in each bank account if the bank went under? The limit isn't per account; from the FDIC website: > The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. A properly notated pooled account should confer FDIC insurance to the underlying depositors. But if the intermediary doesn't properly notate the underlying accounts at the bank, or doesn't send all of your money to the underlying bank, FDIC insurance doesn't cover that. And you won't have statements from the insured bank to verify that the money is there either. There's a FDIC document specifically about these kinds of pooled accounts: https://www.fdic.gov/deposit/diguidebankers/documents/fiduciary-accounts.pdf https://www.fdic.gov/deposit/diguidebankers/documents/fiduci...