[doktorhladnjak]

There is absolutely moral hazard for depositors. If uninsured SVB depositors had gotten something like 90¢ on the dollar for deposits, every company with uninsured deposits would start thinking about how reliable their bank might be. More due diligence would happen.

Of course, we also would have seen runs on many more regional banks. The "too big to fail" banks like JP Morgan and BofA would only have gotten much larger.

[Turskarama]

It shouldn't be up to depositors to do "due diligence" on their bank, making sure they're compliant is exactly the kind of thing government is _for_.

Imagine if you had to do several hours of research on every single thing you purchased and investment you made, you'd never have time for anything else and there's still a chance you miss something.

Compare that to experts doing it and spending a lot more time on it, then slapping anyone who is not up to standard. It's a way more efficient system.

[kshacker]

If you see a bank offering 4.75 percent on a certificate vs another offering 2.75, which one would you choose? If you always choose the highest, should you not have a stake if the bank was found to take a lot of risk to offer this higher rate?

[bagavi]

Break up your deposit into 250k$ accounts, each insured by FDIC. Let software handle the logistics of payments via multiple bank accounts.

Asking depositors to do the due deligence is a strawman.

[norgie]

> Asking depositors to do the due deligence is a strawman.

Except that there are many commenters in this exact thread making that argument.

As for splitting up your deposit into $250k chunks, I agree, companies should do this as much as possible. But it would be hard for some companies. An extreme case is Circle, who says they had $3.3 billion in SVB. To get all of this covered, would require 13,200 different banks. It looks like there are only 4,236 FDIC-insured banks in the US. Add in another 4,853 NCUA-insured credit unions, and we're still left with $873 million uninsured, despite using nearly 10,000 accounts.

[HWR_14]

Circle is an extreme case with over 100MM USD of revenue each year and whose primary product is memory management. I'm fine saying that they have to do due diligence.

Sure, I don't want depositors to have to do tons of due diligence to manage a small business payroll. But I am also fine saying that a company with over 2 billion in USD should be able to afford to find safe places to stash it.

[bagavi]

Can't you have multiple accounts in the same bank?

[dalyons]

Why? What is anyone gaining by forcing individuals and businesses to utilize middlemen to split their cash across dozens of bank accounts? Just guarantee deposits for all and skip the performative complicated BS.

Spread 250ks all comes out of the same fdic pool anyway, so why bother?

[xmcqdpt2]

Exactly. The 250k limit is clearly meant to ensure individuals don't have to fear bank runs. Saying companies should split accounts so that they all remain close to 250k is clearly a hack that goes against the intent of the law.

I think the government should reserve the right to haircut large depositors in cases where there is serious negligence or malfeasance, so it makes sense to have the limit. But it's also a good idea not to do that in cases of mere incompetence, like here.

The alternative is to do like Canada and basically keep around a handful of big banks and make it illegal for them to acquire each other (to avoid further concentration). We don't have to rescue them basically ever... but if we did it would be abysmally expensive. And customer service is garbage.

[tveita]

Spreading the deposits out is the point, it's not a hack at all. If 1/3th or 1/5th or whatever of your deposits are locked out you can still make payroll and carry on while the odd bank hiccup is sorted out, and a haircut will affect a smaller fraction of your deposits. Meaning you don't need to be on a hairline trigger to pull out at the first sign of trouble. Having the big players keep their money in multiple bank accounts adds stability in itself.

[bagavi]

The banks don't want you to split the money because they will have to pay higher insurance to FDIC. This will eat into their margins. The business and the customers interests are not aligned in this case.

Until the law changes, you have to look out for yourself and not beg for bailout. Also, this is not complex since software takes care of it behind the scenes. Our company did it from day 1.

Also more than half of deposits by volume are FDIC insured so the system can handle the whole volume if the customers choose to do so

[youngtaff]

Asking large depositors to split their deposit amongst multiple banks is unreasonable

Asking them to insure their own funds is a reasonable thing to do though

[bagavi]

It's thier choice to adopt either solutions.

My point was that the existing tools and infra was enough for svb customers to secure themselves. At a high level, they didn't bother getting an insurance and now they beg for bailout.

[throwawaylinux]

> It shouldn't be up to depositors to do "due diligence" on their bank, making

It certainly should be if they aren't paying for their accounts to be insured. The government does not exist to prevent private companies from going out of business.

> sure they're compliant is exactly the kind of thing government is _for_.

And if regulations magically remove all risk, then insurance should be very cheap so no reason not to get it.

[Turskarama]

Ridiculous, how can the average person _possibly_ know if their bank is doing everything properly or not?

Even if they are when you open the account, how often should you check to make sure they still are?

If insurance is necessary then the banks should pay for it, then if they want to have lower insurance premiums it's up to them to lower their risk profile. Yes, they will pass these costs on to the customer, but banks with lower risk profiles will then be cheaper making them more popular, and increasing stability of the entire system.