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by ptero 2744 days ago
Brokerages love fat cats and most provide free high quality additional insurance up to at least 5-10M. What happens if brokerage fails? My bet is its insurance, reinsurance or gov't would bail investors out (ask Lehman clients many of whom had accounts a LOT bigger than 250k). My guess is that it is safe to keep at least 5M in a single brokerage, but decide for yourself.
2 comments
crgt 2744 days ago
Many Lehman clients got pennies on the dollar..
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ptero 2744 days ago
Can you provide some references? This is an honest question, I am just stunned that this did not cause major account fragmentation (fat cats splitting millions into 500k chunks). Just googling (which, granted, is not truth) seems to point to major news outlets confirming that customer accounts were safe.

To clarify, I am talking about customers who held money at LB invested in mutual funds or securities. If the account had a mix M of securities before LB collapsed they would have the same mix once the dust settled and LB account was forced to whatever other brokerage. If this is incorrect (not for some advanced hedge funds, etc. but for retail customers) I would love to know.

If you are talking about folks who held LB stock or bonds, they sure did lose money when the company went bankrupt, but that is not unexpected. Stocks fluctuate in price and some go all the way to zero; for every Google there are a few KMarts, Sears or Enrons.

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jonwachob91 2744 days ago
Do you have any links or reading material about what lehman clients were able to pull out?
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ptero 2743 days ago
This came after a quick search, which seems to confirm that if a client had, say, 100 shares of Amazon in a brokerage account at LB he would still have those: a brokerage must separate retail customers investments in other securities from its own money and funds.

https://www.kiplinger.com/article/investing/T023-C000-S001-w...

However, reading more I am not as sure that individual investors holding money in LB investing in other (non-LB) securities did not suffer. I am not an expert and cannot always distinguish between reputable sources and conspiracy theorists. Can someone provide some good references?

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