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Robinhood Will Retool Checking Product Following Scrutiny

bloomberg.com

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Re: Robinhood Will Retool Checking Product Following Scrutiny

#81

Post by mikeash »

throwaway98434 wrote: post #61
JumpCrisscross wrote: post #47

Earlier quoted context omitted.

> the alternative is that nobody is willing to try anything new just because there is no existing precedent explicitly saying that it's OK The part that was grossly problematic was Robinhood falsely claiming it was SIPC-insured. SIPC insurance isn’t automatically granted. There isn’t any useful innovation limited by telling people “try new things, but don’t lie about having certifions you don’t have.”

Had they launched a product, sure. But this was mere talk about a future product which they've decided "to retool" after scrutiny. No one was harmed here. This is fine.

If I try to sell you a car and tell you that it has a 20-year warranty, which it turns out is a total lie, is that fine just because I got caught before any cars changed hands?

False advertisement shouldn’t be acceptable even in the case where it didn’t go far enough for people to actually obtain the product.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#82

Post by mikeash »

AnthonyMouse wrote: post #62
eropple wrote: post #53

Earlier quoted context omitted.

C'mon. Never try new things? How about ask before you start promoting them ? You think a couple phone calls with SIPC wouldn't have disabused them of the notion? This is slack laziness and cavalier disrespect for their userbase. I had started toying with Robinhood; I immediately pulled everything I've got back out. They aren't trustworthy custodians.

> How about ask before you start promoting them ? You think a couple phone calls with SIPC wouldn't have disabused them of the notion? Why is that supposed to be necessary? The government is more than capable of telling you if it's a problem, and if it's not a problem -- which is the default -- it would only waste resources on the part of everyone. What I suspect may have happened here is that the traditional banks s…

“You can trust this product. If it ever breaks, AnthonyMouse on Hacker News will reimburse you the full purchase price.”

Would you be ok with that?

Re: Robinhood Will Retool Checking Product Following Scrutiny

#83

Post by mikeash »

talltimtom wrote: post #74

Why is everyone acting like robinhood stole people’s money or destroyed people’s lives? They wanted to make a product that would have been incredible value for costumers, got yelled at by the existing market and are now retooling to see if they can still put it out another way. No one has been hurt and they are just pushing forwards to get this out. You guys make it sound like they sold people’s private info to under…

They tried to obtain people’s money under false pretenses. The fact that their scam failed doesn’t make it ok.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#84

Post by dragonwriter »

Lazare wrote: post #71
latch wrote: post #42

Earlier quoted context omitted.

Maybe it's because I don't understand how deposit insurance works. Maybe it's because I live in a country where there are relatively few banks. But is this insurance actually meaningful? For example, if RBC "failed" in Canada, woulnd't the payout largely come from the Bank of Canada printing more money and all this could essentially happen without CIDC existing? You might get your money back, but now a loaf of bread…

In the US, FDIC is primarily funded by fees banks are required to pay, and there is an actual fund held by the FDIC to cover this. However, if the fund is exhausted the FDIC is backstopped by the federal government, which would step in and cover any losses. Like any other form of government spending, that is not directly covered by "printing money"; that can't be done by the federal government. Instead, the money wou…

> In the US, FDIC is primarily funded by fees banks are required to pay, and there is an actual fund held by the FDIC to cover this. However, if the fund is exhausted the FDIC is backstopped by the federal government, which would step in and cover any losses.

Moreover, it's “frontstopped” by the government facilitating takeovers of failing banks by healthy banks that will cover deposits.

> In the US, some portion of the funds would indirectly come from the central bank printing more money, but only to the extent that it would not cause that sort of spike in inflation

That's true to the extent that large bank failures are likely to be correlated with (and may contribute to) the broader economic conditions which would promote easier money policies at the Fed, but a major point of independent central banking is creating separation between government fiscal needs (like paying off deposit insurance claims) and monetary policy.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#85

Post by dragonwriter »

throwaway98434 wrote: post #61
JumpCrisscross wrote: post #47

Earlier quoted context omitted.

> the alternative is that nobody is willing to try anything new just because there is no existing precedent explicitly saying that it's OK The part that was grossly problematic was Robinhood falsely claiming it was SIPC-insured. SIPC insurance isn’t automatically granted. There isn’t any useful innovation limited by telling people “try new things, but don’t lie about having certifions you don’t have.”

Had they launched a product, sure. But this was mere talk about a future product which they've decided "to retool" after scrutiny. No one was harmed here. This is fine.

> Had they launched a product, sure. But this was mere talk about a future product which they've decided "to retool" after scrutiny.

It was not mere talk, it was talk about a waitlisted feature used to induce signups to (and because of a “referrals move you up the line” policy, also to induce providing personal information if third parties as referrals to) Robinhoods existing service.

That is, it was false representation used to induce people providing Robinhood things of value, and thus, arguably, commercial fraud.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#86

Post by dragonwriter »

mikeash wrote: post #83
talltimtom wrote: post #74

Why is everyone acting like robinhood stole people’s money or destroyed people’s lives? They wanted to make a product that would have been incredible value for costumers, got yelled at by the existing market and are now retooling to see if they can still put it out another way. No one has been hurt and they are just pushing forwards to get this out. You guys make it sound like they sold people’s private info to under…

They tried to obtain people’s money under false pretenses. The fact that their scam failed doesn’t make it ok.

They almost certainly got people to give personal info for signups and referrals based on the waitlist and referrals move you forward in line announcement; so it's not just trying to get things of value under false pretenses.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#87

Post by AnthonyMouse »

mikeash wrote: post #82
AnthonyMouse wrote: post #62

Earlier quoted context omitted.

> How about ask before you start promoting them ? You think a couple phone calls with SIPC wouldn't have disabused them of the notion? Why is that supposed to be necessary? The government is more than capable of telling you if it's a problem, and if it's not a problem -- which is the default -- it would only waste resources on the part of everyone. What I suspect may have happened here is that the traditional banks s…

“You can trust this product. If it ever breaks, AnthonyMouse on Hacker News will reimburse you the full purchase price.” Would you be ok with that?

> “You can trust this product. If it ever breaks, AnthonyMouse on Hacker News will reimburse you the full purchase price.”

> Would you be ok with that?

When I'm in the insurance business and the party making that claim is paying me insurance premiums under the same terms that I'm already insuring existing things with a commensurate level of risk? That is how insurance works.

If you have renter's insurance and you buy a new television on credit, telling the creditor that you have renter's insurance before you tell the insurance company that you have a new television is not some kind of fraud. If the insurer then suddenly threatens to cancel your insurance if you try to add the television, you have to go back to the creditor, but why would you have reasonably expected them to do that?

Re: Robinhood Will Retool Checking Product Following Scrutiny

#88

Post by mikeash »

AnthonyMouse wrote: post #87
mikeash wrote: post #82

Earlier quoted context omitted.

“You can trust this product. If it ever breaks, AnthonyMouse on Hacker News will reimburse you the full purchase price.” Would you be ok with that?

> “You can trust this product. If it ever breaks, AnthonyMouse on Hacker News will reimburse you the full purchase price.” > Would you be ok with that? When I'm in the insurance business and the party making that claim is paying me insurance premiums under the same terms that I'm already insuring existing things with a commensurate level of risk? That is how insurance works. If you have renter's insurance and you buy…

That is fraud unless your insurance explicitly covers new purchases without first being informed. That is far from a given.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#89

Post by benj111 »

rchaud wrote: post #78
benj111 wrote: post #72

Earlier quoted context omitted.

While I agree this doesn't look great, I'm sure theres a few more possible explanations. Eg Robinhood could have notified the sipc some more or less reasonable time ago, that they were planning this product, and the sipc took a(n un) reasonable time to get back to them. Maybe they played golf with someone at the sipc who said they'd sort it, and it would be fine.

Ifs, buts, maybes. The margin for error is a lot smaller when you're asking people to trust you with their money.

Agreed.

Just wanted to point out that there are scenarios where it isn't completely Robinhood's fault.

And they probably aren't evil business men out to rob from the poor, to give to the rich. Occam's razor and all that.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#90

Post by AnthonyMouse »

JumpCrisscross wrote: post #66
AnthonyMouse wrote: post #62

Earlier quoted context omitted.

> How about ask before you start promoting them ? You think a couple phone calls with SIPC wouldn't have disabused them of the notion? Why is that supposed to be necessary? The government is more than capable of telling you if it's a problem, and if it's not a problem -- which is the default -- it would only waste resources on the part of everyone. What I suspect may have happened here is that the traditional banks s…

> Why is that supposed to be necessary? If I say “I’m insured by AIG,” I actually need to be insured by AIG. It’s not AIG’s job to tell me I’m lying. SIPC coverage isn’t automatically granted. Robinhood already has SIPC coverage through their brokerage products; this is abundantly clear to everyone there. Whether through fuck-up or will, they ignored a clear regulatory line.

> If I say “I’m insured by AIG,” I actually need to be insured by AIG. It’s not AIG’s job to tell me I’m lying. SIPC coverage isn’t automatically granted. Robinhood already has SIPC coverage through their brokerage products; this is abundantly clear to everyone there.

But that's the weird thing. This new product is essentially a combination of two things.

1) A brokerage account instructed to hold safe treasury-related securities. This is exactly the sort of thing the SIPC normally insures. Expecting them to refuse that is really bizarre -- it's their main purpose. And as you note, they already do have that insurance for their brokerage accounts.

2) An ATM card and bank routing number that makes it easy to transfer to/from the brokerage account, so that it can be used as a checking/savings account. This is the real innovation, but it doesn't affect the risk to the insurer in any apparent way or really have much to do with them at all. Withdrawing the insurance over this only makes sense if it was done out of politics. Punishing them for failing to anticipate a political backlash seems particularly unjust.

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