Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Robinhood Will Retool Checking Product Following Scrutiny

bloomberg.com

Post reply on HN
Print view View original

11–20 of 103 posts

Re: Robinhood Will Retool Checking Product Following Scrutiny

#11

Post by whitepoplar »

evanriley wrote: post #8
snuxoll wrote: post #2

Somebody from Robinhood's legal team either said "yeah, the SPIC will totally be okay with this" or management ignored any advice to the contrary, whichever it was those people need to pull their heads out of their asses. Even Schwab, an investor bank, has insurance from the FDIC for their deposit (and sweep) accounts - if they could have gotten away with just SPIC coverage don't you think they would have?

As well as Fidelity's checking account, Cash Management Account, is FDIC insured. This definitely feels like a case of Robinhood ignoring some advice.

Not quite. Fidelity CMA accounts are brokerage accounts and thus cannot offer FDIC insurance because Fidelity is not a bank. Fidelity accounts offer SIPC insurance.

However, Fidelity's trick is to sweep all cash into third-party FDIC-insured bank accounts behind the scenes. This yields several benefits:

1) Practically speaking, it offers the exact same FDIC insurance as a real bank account, because your money is being held in a real bank account.

2) Since cash is deposited into FDIC-insured accounts behind the scenes, Fidelity can seamlessly split money up so that each sub-account holds no more than $250k (the limit of FDIC coverage). This is how they can offer $1.25M of FDIC insurance (split between 5 accounts).

The customer never deals with this complexity, as it's completely abstracted away, behind the scenes. The result is a cash management account that offers $1.25M FDIC insurance on cash balances.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#12

Post by jancsika »

mikeash wrote: post #3

“However, we realize the announcement may have caused some confusion.“ Gotta love corp-speak. “We lied our asses off but didn’t realize you’d catch on so fast.”

It's difficult to imagine a situation where an individual could get away with something like this.

Suppose someone gets a gig playing church hymns, and instead they stubbornly play an impromptu hour-long jazz interpretation of "Free Bird" until the police are called. What would happen if their response to the churchgoers was, "I was excited and humbled by the response I received yesterday! I'll be revamping my accompaniment style in preparation for next week's service!"

Would any church's response really be, "Well, ok, as long as you're sure you won't do a completely incompetent job next time..."

Re: Robinhood Will Retool Checking Product Following Scrutiny

#14

Post by fma »

kakaorka wrote: post #4

So no one actually did their due diligence before announcing the product. I’m quite shocked that a ~$6 billion company can behave this way.

I'm sure someone in management came up with the idea and said it will make a lot of money or get lots of customers. Anyone who said otherwise is a debbie downer and shunned. It also reveals their culture of speaking up.

I don't see how such a new bold product can pass legal, even if it passes management. Their legal team probably sit around nodding their head as they collect their paychecks. They deserve to be fired before getting Robinhood into much bigger trouble.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#17

Post by Wowfunhappy »

beefman wrote: post #15

Submission with non-paywalled version https://news.ycombinator.com/item?id=18691119#18691536

You should be able to open the article in a private browsing window. Bloomberg provides ten free articles a month normally, and of course, that number is based on cookies.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#18

Post by ulfw »

Silicon Valley is broken. Ethics went out the window years ago, replaced by greed. Whether that is Google suddenly wanting to go into China, Facebook lying and spying on everyone and their dog or companies like Uber et al ‘bending the law’. The most recent such bend was now this stock trading company trying to sell customers Checking accounts that were never insured as such.

Time for the old valley of scrappy founders who wanted to change the world for the better to return.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#19

Post by muhneesh »

The correct response here would be for Robinhood to cancel the product and apologize, instead of revamping their marketing materials.

They are not offering a "cash management" service. Unless they get insured or find another vehicle to prevent funds from being at risk, they are effectively just borrowing money from their customers.

This is sardonically innovative, as they've invented the retail investor equivalent of a revolver[1].

If they continue to market this without deep protections for consumers, this is effectively a scam and I would encourage anyone originally considering this to scuttle their considerations.

[1] https://www.investopedia.com/terms/r/revolver.asp

Re: Robinhood Will Retool Checking Product Following Scrutiny

#20

Post by Godel_unicode »

jancsika wrote: post #12
mikeash wrote: post #3

“However, we realize the announcement may have caused some confusion.“ Gotta love corp-speak. “We lied our asses off but didn’t realize you’d catch on so fast.”

It's difficult to imagine a situation where an individual could get away with something like this. Suppose someone gets a gig playing church hymns, and instead they stubbornly play an impromptu hour-long jazz interpretation of "Free Bird" until the police are called. What would happen if their response to the churchgoers was, "I was excited and humbled by the response I received yesterday! I'll be revamping my accomp…

You've never seen someone screw something up, apologize for screwing up, and promise to do better next time? I find that hard to believe.
Post reply on HN