[MaxGabriel]

Hey all, I'm the CTO/a co-founder at Mercury. Here's background on this and where we are now:

- We currently work with two partner banks, Evolve Bank and Trust and Choice Financial

- Both our partner banks operate or are part of a sweep network (https://mercury.com/blog/company-news/understanding-bank-swe...), where they can move funds into other banks. Each bank your money is in increases FDIC coverage by 250K.

- For customers on our partner bank Evolve, this was bumped from 1mm to 3mm as of this morning. You get this automatically if you have accepted the T&Cs for the sweep program already; if you haven't you can do so at: https://mercury.com/settings/vault

- For customers on our partner bank Choice, you're still at 1mm FDIC insurance. We are working on getting you an Evolve savings account (or getting increased coverage from Choice) by tomorrow morning, or you can keep excess funds in Treasury (see below)

# treasury

- We also have a product called Mercury Treasury. This allows you to invest in mutual funds, the safest of which is a Vanguard Treasury Money Market fund (VUSXX), which invests primarily in short-term U.S. Treasury bills https://investor.vanguard.com/investment-products/mutual-fun...

- These securities are held in your name at Apex Clearing, which is https://www.apexclearing.com/

- They're not part of any fractional reserve system like with banks; every share of a mutual fund you hold is in your name and Apex can't lend against it (unless you give them permission which would be weird)

- You can automatically sweep any funds between our treasury product and your savings account. Liquidity is about 3 to 4 days.

- All treasury funds are visible on your Mercury dashboard, so you don't have to manually manage fund movements or keep track of your total balance across websites

- You also earn interest on these

AMA if you'd like, though caveat I'm jumping between a lot of Slack messages right now (edit: probably bowing eat to eat lunch)

[jqpabc123]

Each bank your money is in increases FDIC coverage by 250K.

Who is the owner of record on these Mercury accounts at "other banks"?

Can I withdraw *my* money from these "other banks" without Mercury involvement or approval? If not, then *Mercury* may have increased FDIC coverage but the Mercury depositor does not.

[MaxGabriel]

"other banks" was a bit ambiguous, here's the list of banks for our partner Evolve: https://www.getevolved.com/openbanking/fdic-mercury/

You as the customer are the owner of record on the funds. The accounts are held by our partner banks at these other banks, as your agent and custodian (something like "Evolve Bank and Trust for benefit of Acme Corp).

The FDIC insurance applies to the business holding the funds; it is definitely not insuring Mercury itself.

You do need to use Mercury to withdraw the funds; we still run all the authorization and compliance rules around this, and there isn't a facility for you to go into eg United Texas Bank and ask for your money. That said, if Mercury were to go bankrupt tomorrow, your funds are held by our partner banks who have full KYC/KYB info on you would be able to access all your funds.

[chernevik]

> you would be able to access all your funds

How fast and how?

You might consider providing a "living will" document that keeps your clients up-to-date on where the $$$ are and how they access them. If I'm using something like this I would want to be sure I can make payroll the day after you vanish.

(Not a potential customer or cash management expert, prioritize accordingly.)

[jqpabc123]

How fast and how?

My best guess, not until OK'd by a bankruptcy judge. You may have a strong claim on the funds but so does Mercury --- hence the fact stated above that you can't withdraw without their approval. On the other hand, they may be able to withdraw without your approval. A bankruptcy judge is the only one who could override their claim and release these funds to you.

Remember, SVB was an FDIC bank. The reason depositors are able to withdraw money today is because of the quick actions of the FDIC.

[chernevik]

That doesn't sound even remotely close to right.

If the client is the owner of record Mercury hasn't any claim at all.

[jqpabc123]

My guess, this is a trust/FBO co-mingled type account of some sort.

Only Mercury knows the exact structural details but based solely on their statement above, they have significant control and claims that you can't easily override yourself.

I wouldn't count on this all being resolved quickly in the event of a bankruptcy.

[qqqwerty]

This is the question that needs to be answered before everyone starts throwing their money at these sweep accounts.

SVB offered sweep accounts. Guess how that worked out for folks with money in those accounts? They lost access just like everyone else. If you had a sweep account and you needed to make payroll on Friday, you were not protected.

[chernevik]

I expect these funds would have been available Monday, but I'm not a cash flow management expert and don't know the mechanics of how sweeps work.

[tamade]

> We also have a product called Mercury Treasury. This allows you to invest in mutual funds, the safest of which is a Vanguard Treasury Money Market fund (VUSXX)

Mercury charges 60bps for their Treasury product. Why the hefty fee for buying MMFs? VUSXX expense ratio is 9bps for comparison.

[unusualmonkey]

Happy customer of Mercury, and was pleased to see the FDIC increase this morning.

Question: what happens when FDIC limits are exceeded. For example, someone deposits 5M on a 3M limit.

Are the excess funds equally distributed over the underlying banks, or is there a specific allocation strategy?

[MartinMond]

Hey Max, I think your offering is amazing but it might be built for the world of yesterday: Since starting this weekend apparently all deposits are 100% insured, why would I go to Mercury to take advantage of sweeps or a money market fund, when my bank offers me slightly higher rates for uninsured-but-insured-in-practice deposits?

[MaxGabriel]

Hey, thanks Martin.

1. As others have said in the comments, I wouldn't assume all funds are 100% insured. It is trending that way but I think if you are a CFO managing 10s of millions, its responsible to consider other assets.

2. Our interest rates on Treasury are pretty competitive, up to 4.67% for the slightly-less-conservative fund MULSX (various conditions apply, depends on how much you hold in treasury, etc; see https://mercury.com/treasury for details).

We are OK not having the absolute highest interest rate offering. Our position is:

* The Mercury product is much better than what most banks offer, across features like searching transactions, WebAuthn logins, virtual cards, etc (You can try the whole website at https://demo.mercury.com/)

* Mercury is much better optimized for startups (eg compliance that understands startup needs, doesn't ask your CEO to go into a branch to send wires)

You can always get a higher interest rate by eg buying treasuries yourself. Our position is for most founders, investing in these mutual funds is a safe, no-brainer options that optimizes for safety while keeping the convenience of a single dashboard.

[gnicholas]

I get this line of thinking, but I also think there's a counterargument that we're all on notice now that banks can go under. As commenters in other threads have noted, people are rebalancing their personal and business accounts right now. Companies like Roku probably won't have $400M at one institution anymore (without outside insurance). That means that if this happens again, many of the people who would have been screwed without a backstop this time around will be in the clear next time. There won't be as much pressure applied by high-level executives and lobbyists, so, as the saying goes, "past performance is not a guarantee of future results".

[tough]

to be safe?

[yunwal]

How is this safer than the alternative? There's no world in which the FDIC lets a bank the size of SVB default on it's deposits, so there are basically 2 scenarios here:

1) You get bailed out no matter what your insurance rate

2) Defaults are at such a high rate that the FDIC doesn't have the money to bail everyone out, the economy tanks, and all businesses that rely on risky VC investment fail anyway

It's like betting $100 on something that won't happen until you're dead. Sure, you might be correct, but there's no real benefit to it.