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by dalyons 1175 days ago
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?
2 comments
xmcqdpt2 1175 days ago
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.

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tveita 1175 days ago
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.
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bagavi 1175 days ago
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

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