[Ekaros]

So the people could instead give their money to a bank which then would offer various deals. Give money to 1 year and receive certain rate on it.

Point is that no one should be forced to take on risk if they are using a bank. Instead it should work like any other investment.

[colinmorelli]

Isn't this just exactly what the FDIC is? The vast majority of people do not have more than $250k in deposits sitting in cash. More than that sitting around in cash wouldn't be a prudent financial decision anyway, since putting that capital to work (even in very safe investments), would yield a better return.

Those that are below $250k are taking effectively zero risk. The worst case scenario is possibly losing access to funds for one business day before the FDIC returns deposits up to the coverage limit.

This is, of course, without playing games using sweep accounts or other instruments.

[rashkov]

How many businesses have less than 250k though? I’m surprised that the insured limit isn’t higher for businesses. Depositing your money in a bank doesn’t feel like it should be a risk/reward decision, like investing in the stock market

[colinmorelli]

This speaks to my latter comment. You can use sweep accounts to increase protection, money market accounts which have different risk profiles, T-bills backed by the USG, etc.

That said, it's all a tradeoff. Increasing FDIC insurance coverage means decreasing the yield on savings accounts, since banks fund FDIC and wouldn't take a cut in profits for it. Not sure what the optimal outcome here really is.