Hacker News Reader

Comment by FiberBundle | Hacker News Reader

Why do you need to hold that much cash in deposits though? There are alternatives that provide essentially the same kind of liquidity such as money market funds, which are used by other businesses. The rules were pretty clear: deposits are insured only up to $250k, anything above that isn't risk-free. If you don't want to have the slight overhead of finding alternatives for anything that supersedes that amount, you should have had to accept the risk that you might lose anything above those $250k.

View on HN

Are you serious? How do you think companies that earn over 1M per month operate? Do you think they all receive the cash on the same day and make the payouts on that day itself?

> you should have had to accept the risk that you might lose anything above those $250k.

This laughably impractical. If you run any medium/large SaaS company you have payments continuously rolling in and you have to build up a balance to pay the salaries. The bank account is in a constant state of flux and a lot of times its at multiples of the insurance limit because a certain payment hasn't gone through yet, and a large advance just came in. Are you expecting every company to risk manage these large amounts in real time? Is that where companies should be spending their resources on? What's the point of having financial institutions and regulations when you're expected to micro manage basic aspects of the financial rails the whole economy runs on.

It sometimes feels people really like dunking on those impacted by this especially since there's a lot of schadenfreude about SV and especially the VCs that embarrassed themselves, but I feel like the correct answer isn't "hahahaha those idiot companies didn't make 100 bank accounts and perfectly shuffle everything in realtime", but "hm, isn't it a bit strange that we're incentivised to go to extremes with this relatively inefficient activity"

Why not just buy insurance for the amount going over 250k? I am sure that all reputable insurance companies offer that product well priced.

Or you could just insure your deposits like I am sure all big companies do.

Just like banks bigger than SVB remember to hedge their currency risks (Which one could argue that SVB with a 88b$ position probably should have considered also).

Actually, having started a company in Denmark, this was an offer the bank we got bank account with had.

It is actually laughable that you can assume that one can run a million dollar company without considering insuring your deposits.

IMO banks should be doing this anyway (insure deposits). I think most time founders are so engrossed in product-market fit and growth that finance is after thought. You're provided an "army" with VC cash and you are expected to be own an entire category with that army. It seems rational to me that most people would be thinking strategy and future attack plans rather than the extremely rare chance that the whole army itself gets kidnapped.

Ideally we as a society, should be able to offer people peace of mind to deposit large sums of money and not worry about it being lost. Expecting everyone to perform financial gymnastics just to keep their money feels like a complete waste of resources.

Maybe the solution is to create a tier A bank that gives you no returns, charges you a flat fee, and any amount of money deposited is guaranteed. I know people do that with treasuries, but thats a lot of extra steps to put money in and out.

Keep in mind, tiny teams with no "finance person" easily receive more than 1M as part of seed or series A. Very rarely is their first hire for managing that money. Should it be? Is it worth it? Or should you rely on the financial system and regulation protecting your own money.

Well you can do that in cash or crypto. But you still want to the banks protection, right?

You could go down and withdraw your 20mil dollars and put them in your couch. But you kind of like that the bank takes care of security for you.

But you don't want to pay for that insurance?

When you start a company, you already insure tonnes of things. You employees, etc. Why not your financial position.

Do you also expect the society to take care of your liability insurance? or health insurance?

(It is actually laughable, that Americans think that the government should insure their deposits but not their health)

I think you're strawmanning here. I'm not against deposit insurance. I merely suggested it should actually be part of the banking regulation.

Like maybe it's a default line item monthly fee to insure your deposits and you can choose to opt out of it. The default is to protect your funds. My guess is very few people will opt out, including me.

It is a part of the regulation, up to USD 250k, which appears to be a good limit for people who should be aware of doing stuff like this themselves (in EU it is EUR 100k, so the US more than doubles that amount).

I think this just shows the irresponsibleness of people with large deposits.

Reply on news.ycombinator.com