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

Banking in uncertain times

bitsaboutmoney.com

Post reply on HN
Print view View original

41–50 of 378 posts

Re: Banking in uncertain times

#41

Post by ragnot »

alecco wrote: post #31

Just use a MM account at a bank/institution using Federal Reserve deposits. It sucks to concentrate on the large big institutions but it's the only safe move right now. Note, the Federal reserve has now insane liabilities. But they can print money so they will never default. If your payroll and expenses are in USD nominal you are covered. If you go, aha! but how do you safely protect your funds from inflation and Fed…

The answer to the inflation question traditionally has been to short the US dollar via investing in real estate with loans.

Re: Banking in uncertain times

#42

Post by dsr_ »

lifty wrote: post #33

I have been seeing conflicting opinions from people in the financial know-how. On one hand, patio11 says that you can ignore this and that the banking system is very resilient. On the other hand, him and others mentions that you need to use 3rd party providers in order to distribute your deposits in order to have full insurance coverage. Is there any way for a non sophisticated person to avoid these headaches? Otherw…

If you are storing more than $250K (the standard insurance limit), then you need to distribute your deposits. It is as simple as opening accounts in N/250000 banks, although if you are close to an integer or expect the cash to increase substantially, you might want more than that.

So for individual people, this affects... maybe 5%. It certainly affects small companies, but those are entities that we, as a society, expect to have good financial advisors. (It turns out that many of them do not.)

Every bank and credit union I've ever dealt with has prominently placed the FDIC or NCUA insurance terms on their paperwork, website and physical doors. When you sign up for an account with a brokerage/bank, they are always explicit about what accounts, if any, are protected savings and which are unprotected investment accounts.

Re: Banking in uncertain times

#43

Post by phphphphp »

lifty wrote: post #33

I have been seeing conflicting opinions from people in the financial know-how. On one hand, patio11 says that you can ignore this and that the banking system is very resilient. On the other hand, him and others mentions that you need to use 3rd party providers in order to distribute your deposits in order to have full insurance coverage. Is there any way for a non sophisticated person to avoid these headaches? Otherw…

Pretty much nobody has enough cash held in a bank account for this to be a concern. People were worried about SVB because it was so overrepresented with accounts of more than the insured limit because it was used by cash-rich technology companies. A normal person, even if they’re rich, probably has most of their net worth in assets (real estate, investments) and is not holding cash.

Just don’t exceed the insured amount in a single bank, and if you do need to have more than $250k in cash… either open a second account at a different bank or donate it.

Re: Banking in uncertain times

#44

Post by pjc50 »

lifty wrote: post #33

I have been seeing conflicting opinions from people in the financial know-how. On one hand, patio11 says that you can ignore this and that the banking system is very resilient. On the other hand, him and others mentions that you need to use 3rd party providers in order to distribute your deposits in order to have full insurance coverage. Is there any way for a non sophisticated person to avoid these headaches? Otherw…

> Is there any way for a non sophisticated person to avoid these headaches?

On your own account, once you reach $250k in cash (not pensions or home equity etc) you're basically in the financial 1% and you're sort of expected to be either sophisticated or speak to a "wealth management" firm.

As a business it's more complicated in the intermediate zone before you can hire a Treasury Officer to deal with this, which is basically patio11's argument.

Re: Banking in uncertain times

#46

Post by gabesullice »

lifty wrote: post #33

I have been seeing conflicting opinions from people in the financial know-how. On one hand, patio11 says that you can ignore this and that the banking system is very resilient. On the other hand, him and others mentions that you need to use 3rd party providers in order to distribute your deposits in order to have full insurance coverage. Is there any way for a non sophisticated person to avoid these headaches? Otherw…

I think that advice was meant for different audiences. If you're a W2 employee who has modest savings, you're in the class of people who can safely choose not to add/remove/change any of your banking relationships. You are who the FDIC was designed to protect. If you're feeling like you must "do something" then open another checking account somewhere and keep a month's expenses there. That redundancy is probably worthwhile in good times and bad.

If you're an owner and you need over 250k to be liquid on daily to weekly timescales, but hiring a three people to manage manage your bank accounts sounds unaffordable, you should find a 3rd party that can do that "cash sweep" thing for you.

Re: Banking in uncertain times

#47

Post by spir »

Stablecoins are conspicuous in their absence in patio11's post. Personally, I believe that patio11's loathing of crypto has made him incurious about its potential. But that's not the point here. The point is that stablecoins are about to become a Very Good Deal for ordinary people:

In the near future, stablecoins like USDC will become immune to bank runs because the US Dollar reserves backing them will be held in vehicles that don't loan out the reserves and hold short-duration treasuries directly with the Treasury Department.

At the same time, any person or entity with USDC in their wallet has instant, 24/7 access to global markets at their sole discretion, without intermediaries.

On Ethereum today, anyone can buy Coinbase stock, treasuries, an S&P 500 index, and real estate.

In short, the UX of stablecoins is becoming vastly superior to bank deposits because you'll be immune to bank runs, control your own money, and have instant access to global markets, including for low-risk yield on your stablecoins, such as in treasuries or over-collateralized lending.

Re: Banking in uncertain times

#48

Post by leetrout »

phphphphp wrote: post #43
lifty wrote: post #33

I have been seeing conflicting opinions from people in the financial know-how. On one hand, patio11 says that you can ignore this and that the banking system is very resilient. On the other hand, him and others mentions that you need to use 3rd party providers in order to distribute your deposits in order to have full insurance coverage. Is there any way for a non sophisticated person to avoid these headaches? Otherw…

Pretty much nobody has enough cash held in a bank account for this to be a concern. People were worried about SVB because it was so overrepresented with accounts of more than the insured limit because it was used by cash-rich technology companies. A normal person, even if they’re rich, probably has most of their net worth in assets (real estate, investments) and is not holding cash. Just don’t exceed the insured amou…

Why should someone donate their savings?

Putting money in the stock market is not the answer for everyone and their savings.

Re: Banking in uncertain times

#49

Post by leetrout »

nervousvarun wrote: post #40
lifty wrote: post #33

I have been seeing conflicting opinions from people in the financial know-how. On one hand, patio11 says that you can ignore this and that the banking system is very resilient. On the other hand, him and others mentions that you need to use 3rd party providers in order to distribute your deposits in order to have full insurance coverage. Is there any way for a non sophisticated person to avoid these headaches? Otherw…

Apologies in advance if I'm missing some context here but from my understanding it's pretty straight-forward: in the U.S. an individual is insured by the FDIC up to $250K. So anything you have over that in the one account is "susceptible" to bank failure losses (and even then it's not guaranteed that you'd lose your $...just possible). So if you have $1M parked in one account then you're at risk. $250K parked in 4 ac…

Per person per account type.

Joint accounts are covered at 500k

When a revocable trust owner names five or fewer beneficiaries, the owner's trust deposits are insured up to $250,000 for each unique beneficiary

So 4 people = $1m

https://www.fdic.gov/resources/deposit-insurance/brochures/i...

Re: Banking in uncertain times

#50

Post by pjc50 »

spir wrote: post #47

Stablecoins are conspicuous in their absence in patio11's post. Personally, I believe that patio11's loathing of crypto has made him incurious about its potential. But that's not the point here. The point is that stablecoins are about to become a Very Good Deal for ordinary people: In the near future, stablecoins like USDC will become immune to bank runs because the US Dollar reserves backing them will be held in veh…

This is essentially fanfiction, as stablecoins so far have been very opaque about what they do with their reserves. Especially Tether.

(largely because the mechanics of holding $60bn in treasuries would attract some questions about KYC which stablecoins are unable to answer)

Post reply on HN