The End of Silicon Valley (Bank)
Any article, tweet, or comment section on this issue is rife with willfull ignorance of basic banking practices, chief among this being the strawman multiple bank accounts.<p>The FDIC limit is not just some technicality that businesses abuse with many accounts, it is a recognition of that fact that banks like SVB, which hold large deposits from a small number of highly correlated depositors, are fundamentally more risky than banks with a large number of smaller uncorrelated depositors. Sweeping large deposits across banks and properly investing in treasuries reduces systemic risk and prevents bank runs in the first place. The de facto removal of FDIC caps defeats this diversification and protection.<p>The current dollar value of the cap also makes sense. Unlike what plenty people are trying to claim, there is no amount of money for which that current system is unsuitable. Deposit sweep accounts cover up to $3M (and diversify across banks, <i>exactly the point</i> of FDIC limits). Money market funds provide short-term treasury exposure above that, and businesses with many millions liquid should absolutely be expected to invest in treasuries. If Bogleheads can do it in their retirement accounts why can&#x27;t $10M+ startups?<p><i>Maybe</i> the SVB depositor bailout was necessary in this case to prevent broader panic, but it sets a grim precedent for depositor behavior that ultimately makes the system more brittle and reliant on government handouts (which despite rhetoric to the contrary, will be paid for by the taxpayer&#x2F;bank account holder).