[bee_rider]

Hmm.

Would it be easy nowadays to just have a software service that split up an account into n accounts of less than $250k, and then presented a single interface to all of them?

I guess individual purchases over $250k would be a problem, but I guess a short-term gather operation could be ok, as long as you aren’t too worried about a bank run while that transaction was occurring.

[acjohnson55]

This exists, many times over. It's called a cash sweep. See one example here: https://www.wellsfargo.com/investing/cash-sweep/

[qqqwerty]

And just as a warning, it is still not clear how sweep accounts are handled in the case where the primary bank fails. SVB offered sweep accounts. But due to the intervention, the recovery process of those accounts was never tested in a real life scenario. If recovering your sweep accounts takes months, that could be really bad for a business trying to make payroll. And from what I read, there is some "operational risk" as well, i.e. if a bunch of money hits your account the same day a bank fails, that money will be in your primary banks account and if it is over the FDIC limit that amount will be uninsured.

[acjohnson55]

Great points. Maybe protection can be written into the rules to remove that uncertainty?

[astura]

See, for example, Fidelity's FDIC-Insured Deposit Sweep Program.

https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...

>To provide you with the benefit of FDIC insurance eligibility, the cash balance in your account will be automatically swept into an interest-bearing FDIC-Insured Deposit Sweep position. Since FDIC insurance coverage is currently limited to $250,000 per qualified customer account per banking institution, Fidelity may use several banks, rather than just one, to maximize your FDIC coverage.

[SOLAR_FIELDS]

Mercury has a been taking this idea to a pretty logical extreme lately. At first it was just $1M, but it’s now $5M

https://mercury.com/blog/company-news/understanding-bank-swe...

[bee_rider]

Interesting. So is the coverage cap actually accomplishing much?

[freeone3000]

It spreads risk throughout the system. In a maximally-resilient scenario, everyone would have a small deposit at every possible bank -- then when any bank fails, it's "no big deal", and you won't panic and withdraw your money from the rest. This is similar -- any particular failure is going to be for half (or less!) of your money, instead of all of it, reducing the urgency and spreading out the risk.

[bee_rider]

Ah, that’s interesting. So spreading the accounts across multiple banks is essentially accomplishing the goal of the program.

[dehrmann]

Seems silly to make people jump through these hoops when all the want is a safe, low-yield investment.

[oblio]

There is no safe investment of any kind. Even bonds or cash have risks.

This stuff is immensely complicated once you peer behind the curtains.

[drexlspivey]

Putting money at the central bank (deposit facility) is safe

[oblio]

That's not an investment, though, there's no return on investment. It's just storage.

[drexlspivey]

No you get the overnight rate. Currently 4.65% for USD and 3% for EUR

[oblio]

Oh, interesting, thank you!