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  • #16
    We can all agree that nothing can support a complete collapse of the US financial system.  The point of the $250k cap is to protect against idiosyncratic risk, not a complete financial system failure.  If the DIF runs out of money, it just means that it charged too little in insurance premiums from banks.  It does not mean the FDIC won't pay out insured deposits if a bank fails.  FDIC will just have to get the money from other places, like the Treasury.  Don't pay any attention to the fear-mongering in this thread.

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    • #17
      when i was holding that much cash, i used three different institutions - ally, capital one 360, and barclays. i think barclays had the highest interest rate.

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      • #18
        I also disagree with the fear mongering on this thread. The FDIC is backed by the full faith and credit of the United States, the same guarantee as U.S. treasury bonds. https://www.fdic.gov/consumers/assistance/protection/depaccounts/confidence/symbol.html#Full

        You are insured up to $250,000 per person per bank. It doesn't make any sense to say that T bills are safer than FDIC insured deposits when both are backed by the U.S. federal government.

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        • #19


          The FAQ at the FDIC website is wrong. “The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category.”
          Click to expand...


          The FAQ at the FDIC website is wrong. “The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category.”

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          • #20










            The FDIC can say whatever they want on their website, but the numbers are the numbers. The DIF is about 90B. Intended to insure around 13T in deposits (granted a rough approximation). Maybe it can pay out 1-2% of its obligations. If one institution fails, the FDIC is probably ok. If multiple fail in a systemic crisis, we shall see. The FDIC is a confidence game intended to reduce the chances of a bank run. If a true run on the banks really happened, the FDIC will not be what everyone thinks it is. Not fearmongering, just numbers/reality. It’s also reality that the chances of a systemic liquidity event are very low. But then again so was the insolvency of the XIV.

            And, it will be interesting to see how much the Federal Govt backstops the FDIC when it has declining tax receipts and rising inflation-indexed transfer payments during such a liquidity crisis.
            Click to expand…


            is it correct to summarize that you think multiple banks may be safer than one bank, even if more due to liquidity/bankruptcy than fdic?

            would you say marginally safer or significantly safer?

            thanks

             
            Click to expand…


            No offense, but my opinions are pretty divergent (and pessimistic for the next 10-20 years) on this site and, therefore, try to avoid specific investment recs here to avoid triggering people. So I would take what I have to say with a grain of salt

            I don’t think it matters whether you use one bank or multiple banks to store your cash as long as you are under the 250K limit. Personally, I don’t like those online banks (they take too much risk) and don’t think the extra 1% in interest is worth the hassle of getting your money reimbursed from the FDIC if it goes under but that is me. The cash I do have in a savings/checking  account is basically in one very big and well know SIFI bank with a horrendous derivative exposure and am comfortable with that because if that bank implodes everything will implode. If one/or a few non-SIFI banks go under, it is not going to be a big deal because the FDIC will likely cover it. If a SIFI goes or many banks start to go, there is not much anyone will be able to do and it won’t matter having one or many accounts because everything is pretty interconnected. (Maybe a few small banks with minimal derivative exposure will be ok, but who knows).

            And if you don’t think there is a chance of catastrophic financial event, I would follow the info trickling out of Deutsch Bank (aka Lehman 2.0+). Its going to have to be nationalized at some point but I don’t see how any nation can ensure the liquidity of its ~50T derivative exposure.  I can’t see how it can ever be allowed to go under but I also can’t see how it can be saved. I really think it will be interesting to watch.

            And this isn’t fear mongering, it’s just facts and interpretation of facts. For me, its better to be aware of rare tail risks than to wing it if these financial crises ever unfold which they seem to do every 10 years or so.
            Click to expand...


            Its important to understand your personal exposure to these risks for sure. As some have learned all too intimately recently, derivative and counterparty risk is very real and 100% out of your control. The only thing you can control is how exposed you are personally.

            Also believe in the idea that its fine to worry about this stuff some, but in the end, it doesnt matter to widely structure your assets in a complex manner as if that becomes useful, everythings toast anyway and doesnt matter.

            DB will be very interesting, havent looked into them since the days of the CoCo's. Mueller investigation likely putting some strain and a lot of unwanted attention on them.

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