Comment by ww520
17 hours ago
Whoever claims "your deposits are FDIC insured" needs to be prosecuted as fraud and scam artists. “Your” the company’s deposits in the bank is FDIC insured. My deposit with you the company is not. When the bank goes belly up, your deposit is FDIC secured up to the account limit which is tiny in the scale of things. When your company goes belly up, my deposit is gone.
My understanding is that they split the accounts to keep up with the limit. Otherwise though yeah, FDIC will only step in for the extreme minority scenario of failure by the underlying bank. You absolutely should not be allowed to advertise FDIC insurance unless it goes all the way to the consumer.
> they split the accounts to keep up with the limit
You're right about that, they (and other fintechs) have tons of accounts split across a ton of tiny little banks. All of those accounts and banks are FDIC insured.
But, those aren't the end client's accounts. They're shared pools of money from all the clients. When Alice and Bob both give the fintech $100, the fintech may split up that total $200 across dozens of different accounts. When Alice wants $20 back, it might not even come from accounts where her initial $100 landed, that money probably got sent to Charlie when he wanted his $1,000 back.
The fintech's money was FDIC insured. If any of those banks failed, all the fintech's deposits would be guaranteed. But if the fintech mismanaged their client funds and suddenly their outstanding balances in their client databases are larger than the sum of all the balances of all their hundreds of FDIC bank accounts, their clients are SOL.
> When the bank goes belly up, your deposit is FDIC secured up to the account limit which is tiny in the scale of things.
The FDIC is meant to protect individual people from loosing all of their money from the collapse of a bank, currently at $250k. If you have more wealth than that yet have it all as cash in a single account, then, you're pretty much an ID10T. For regular mere mortals, that's a helluva lot better than a bank telling you to pound sand when they collapse. If you're a business thinking the gov't is meant to protect you, then you are also delusional.
> If you have more wealth than that yet have it all as cash in a single account, then, you're pretty much an ID10T.
SVB collapse has shown that the 250k limit is basically not relevant. Maybe if a big consumer bank like Chase failed then 250k would be the max paid out, but we haven't seen that.
And OP is referring to Synapse, where the FDIC could not help any of the americans who lost their savings because the underlying banks didn't fail. https://www.cnbc.com/2024/11/22/synapse-bankruptcy-thousands...
> SVB collapse has shown that the 250k limit is basically not relevant
Only as long as you're too big to fail...