[ctrl_freak]

> If I went to a bank with a billion dollars I could likely negotiate an even higher rate for such a savings account.

I don't think that's how it works. As others have mentioned, FDIC insurance only covers 250k per depositor per bank. Typically when entities have that amount of cash (think Apple, Google, etc.), they put them into US government bonds, which are effectively equivalent to deposit accounts.

Edit: this is an interesting point, though. Ignoring the insurance issue, what would a bank do if you asked to open a deposit account with a billion dollars (paying, say 2%/year)? My uninformed layman's speculation would be that they would reject you because they wouldn't know what to do with that much money: they have to somehow lend out enough of it to at least break even on the 20 million/year that they're paying you for interest, but at the same time they have to be able to give you back your 1 billion at any time you ask for it.

[dragonwriter]

> Edit: this is an interesting point, though. Ignoring the insurance issue, what would a bank do if you asked to open a deposit account with a billion dollars (paying, say 2%/year)? My uninformed layman's speculation would be that they would reject you because they wouldn't know what to do with that much money: they have to somehow lend out enough of it to at least break even on the 20 million/year that they're paying you for interest, but at the same time they have to be able to give you back your 1 billion at any time you ask for it.

Large banks deal with deposits in total orders of magnitude greater than that (the top banks have over $1 trillion each in deposits.) $1bn in a single demand deposit account is stupid for the depositor, but it doesn't move the needle on a major banks total of deposit accounts, and they can deal with it just fine.

[georgyo]

I think they would totally take it, with all sorts of special terms. Also, they don't need to have a requirement to say they will get you all that cash immediately to keep the tether promise.

Lastly, putting that money in bonds, index funds, and other such things scales well. The wealthfront example I used took on a billion in deposits in a short timeframe: https://www.cnbc.com/2019/04/23/wealthfronts-new-high-yield-...

To your first point, if you have another entity do that type of investments for you and present it as a bank account with a variable interest rate; then you can claim you have a 1:1 cash backing truthfully, even if the reality is different. If you just stored the money in a normal bank, the reality would stay the same.

[arcticbull]

It’s also a thousand million dollars. That’s between 500 and 1000 mortgages in SF or NY. Any direct lender would love that opportunity; they’ll charge 4-5% on a 30-yr fixed and give you half.