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Comment by robraven | Hacker News Reader

Does this mean it's not smart to store more than 250k in robinhood? (I don't, just wondering)

You shouldn’t store more than $250k in cash in any kind of bank or brokerage due to the insurance limit (unless the bank has account insurance beyond $250k.) Investments are different, of course.

Edit: I forgot about the details of the limit. Thank you all.

EDIT: According to the link shared by mortenjorck this is incorrect. A banker explained this to me a while ago, and I just took their word for it. I might have to call my mom now. I'll leave this up so that anyone else with the same misconception will know its wrong

It's actually per bank, per type of account. So $250k in savings accounts, $250k in checking, $250 in Money Market, etc.

This is incorrect according to the FDIC’s website:

> All single accounts owned by the same person at the same bank are added together and insured up to $250,000

Revocable trusts, joint accounts, and other types of accounts with multiple custodians are covered separately, but checking, savings, and so on are not.

https://www.fdic.gov/deposit/covered/categories.html

> It's actually per bank, per type of account. So $250k in savings accounts, $250k in checking, $250 in Money Market, etc.

It's not per type of account, it's per ownership category. Ownership categories are:

(1) Single accounts

(2) Certain self-directed retirement accounts

(3) Joint accounts

(4) Revocable trust accounts

(5) Irrevocable trust accounts

(6) Employee benefit (non-self-directed) plan accounts

(7) Corporation, partnership, or unicorporated association account

(8) Government accounts

https://www.fdic.gov/deposit/covered/categories.html

With a little bit of work, you can probably spread your money into a few of those categories without much problem and have more than $250k coverage, but it's not as easy as just having checking and savings.

Interactive Brokers introduced a Bank Deposit Sweep Program this year. They distribute cash over 10 banks to provide up to $2.5mio FDIC insurance.

Same with Fidelity's free CMA account.

The limit is actually per each ownership category:

https://www.fdic.gov/deposit/covered/categories.html

Per bank per beneficiary with John Smith POD Jane Smith account being considered different beneficiary than John Smith account.

Brokerages love fat cats and most provide free high quality additional insurance up to at least 5-10M. What happens if brokerage fails? My bet is its insurance, reinsurance or gov't would bail investors out (ask Lehman clients many of whom had accounts a LOT bigger than 250k). My guess is that it is safe to keep at least 5M in a single brokerage, but decide for yourself.

Many Lehman clients got pennies on the dollar..

Can you provide some references? This is an honest question, I am just stunned that this did not cause major account fragmentation (fat cats splitting millions into 500k chunks). Just googling (which, granted, is not truth) seems to point to major news outlets confirming that customer accounts were safe.

To clarify, I am talking about customers who held money at LB invested in mutual funds or securities. If the account had a mix M of securities before LB collapsed they would have the same mix once the dust settled and LB account was forced to whatever other brokerage. If this is incorrect (not for some advanced hedge funds, etc. but for retail customers) I would love to know.

If you are talking about folks who held LB stock or bonds, they sure did lose money when the company went bankrupt, but that is not unexpected. Stocks fluctuate in price and some go all the way to zero; for every Google there are a few KMarts, Sears or Enrons.

Do you have any links or reading material about what lehman clients were able to pull out?

This came after a quick search, which seems to confirm that if a client had, say, 100 shares of Amazon in a brokerage account at LB he would still have those: a brokerage must separate retail customers investments in other securities from its own money and funds.

https://www.kiplinger.com/article/investing/T023-C000-S001-w...

However, reading more I am not as sure that individual investors holding money in LB investing in other (non-LB) securities did not suffer. I am not an expert and cannot always distinguish between reputable sources and conspiracy theorists. Can someone provide some good references?

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