I think you can ignore the FDIC limit as long as you are in a bank that has depositors that have made significant political contributions and are also very well connected.
I hope they release a list of depositors that have in excess of $250k in their accounts. That would probably shed more light on the reasons behind the bailout of depositors than anything else.
I would go a bit further and say that whoever was in charge of the Treasury functions at all of the companies which were investing more than $250k in their deposits was also not very good.
I find it hard to believe that everyone did not know how to balance their portfolio and remain insured previously?
You have super wealthy depositors who will be protected even though they are way over the FDIC limit.
You have mom and pop investors who put their 401k money into Index funds and they get screwed.
But the narrative of the The Fed and Janet Yellen is this is not a hand out to Wall Street and weâre protecting the âlittle guyâ. Whoâs the little guy? Wealthy depositors with $20 million at the bank?
In only one bank failure in the last 50 years ( there have been hundreds) has the FDIC failed to fully cover depositors. This is routine.
@CFP, my sense is that a lot of SVBâs customers are tech startups that keep their $3 MM, $10 MM, or $20MM in cash from investors in SVB until they need to draw it down. So, if that money goes away, lots of folks lose jobs. Now a lot of these are software engineers, but also data scientists, marketing people and lots of recent college grads doing a variety of things. So, generally a somewhat privileged crew, but mostly not multi-millionaires.
As I mentioned above, a startup I co-founded was doing all of its banking at SVB. They are suggested to entrepreneurs by VCs and others as understanding how to work with tech startups. We found their service a little weak, but we were a pre-seed stage firm.
My sonâs firm moved all but $250K out of First Republic last week. I suggested that, if they were keeping more at FR, they divide the rest into a number of accounts that hold less than $250K if the FDIC insures multiple accounts with the same owner. But, they decided to keep it simple.
But, the Fed and JP Morgan appear to be preemptively propping up First Republic:
https://www.wsj.com/articles/first-republic-gets-additional-funding-from-fed-jpmorgan-d11e68ca
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Guess youâre happy that they are trying to prop up First Republic to try to keep it from failing in a bank run. But the stock is still down over 70%.
There is either something really rotten in the state of banking or itâs a stupid system shored up by complacency.
Banks as they typically operate are vulnerable to bank runs because they borrow short from depositors who can withdraw at any time with principal guaranteed, while lending long (or buying long securities) that are not callable and may lose value to interest rate risk. They do this to make money on the interest rate spread, but a bank run during a time when the market value of its assets is less than the book value can result in failure.
Is there evidence of illegal activity by the executives?
Basically you are saying that anyone who needs access to their money in the short term should go get ahold of it due to the current macroeconomics policies and their effects on lending. Because you never know.
Illegal? I donât know. Incompetent, maybe.
Listening to several founders that had money in SVB on CNBC right now. They basically said the same thing- they have moved most to JPM. Any other is held in amounts under $250k.
So money will flow flow from smaller banks to the âtoo big t9 failâ banks. Wonder the implications for the smaller banks.
Or they can have
a diversified base of stickier depositors;
a sufficient reserve to cushion against unexpected withdrawals/losses;
a sound strategy to manage the interest rate risk by hedging against large and unexpected interest rate movements.
Haha, I knew this thread would be lit today!
MD, like Years said, no one should keep that much cash in one account because (one can hope) even the least sophisticated depositor knows that cash is not there. Hence, the 250k FDIC ins. cov. You diversify. You spread over other accounts. You get Tâbills (currently more attractive than keeping your money in the bank). They gambled (risk management was mia) and should face the consequences of their mismanagement. Alas, here we are again. A cute bailout under a different name whose outcome will probably be reigniting inflation to the detriment of those who are already hurting the most.
Many of these SV start-ups have only been able to survive due to the FEDâs low interest policies. If you canât survive as a company in a higher interest environment, your business isnât solid/profitable and you should not exist in the first place. Sounds harsh, but again, capitalism.
Someone mentioned âwinners and losersâ up there somewhere (sorry, no time to read it all), but thatâs exactly what the FED has been doing since 2008. Hence, the proverbial âkicking the canââŠ
At this point, whatâs the incentive to be financially responsible if no one will ever be accountable? Precedent was set in 08 and sighs, looks like we continue on the same path.
Disappointing outcome. 
Check this out, UC.
~ 13,000 banks in 1971 (~20K branches) X ~4000 (72,000!!) in 2021âŠ
Talk about concentration! 
Pretty darn quick!
Precedent was set in 1933 when the FDIC was enacted.
I do not think we want to give incentives to depositors to pull their money out asquickly as possible, or to treat depositors differently depending upon whether withdrawal was attempted 10 minutes before or after the freezing of withdrawls.
Peter Thiel told his contacts to pull out on Wednesday. Why should his contacts benefit more than those less connected?
Right. If you are running on $31T debt, what a few billion?