All this stuff going on about the bank crashes has me wondering, where can someone put cash that will be 100% safe?
I realize that having it in a bank account, it will be safe up to $250,000 but what if one has a million dollars? Break it up into separate accounts at different banks?
What about money that’s in a brokerage account? Like TDAmeritrade or Schwab or Fidelity? Are their cash balances insured in any way?
My sweep account at the brokerage is a money-market-fund that is entirely in T-Bills. It’s technically not insured worth a hoot, not for a dollar or a penny. But the underlying thing the money sits on is about as solid as things get pre-asteroid strike. If the government’s “word” and printing press is what they use to prop up banks, T-Bills must also be propped up in that deal I figure. Direct obligations.
I’m sure someone will have a different take but it’s all theirs.
I have money in three different banks, to stay under the $250K limit. The sweep accounts at both brokerages uses FDIC insured bank CDs. The sweep accounts are supposed to divide the money up among CDs at several banks to stay below the limit at any individual bank. My sweep account at one brokerage only has a few thousand in it. I transferred enough out of the other sweep account to a bank account that had a bit of headroom over the weekend, to keep that sweep account under the $250K limit, in case the sweep account manager failed to spread the loot among banks.
And all the loot is deposited with TBTF, because we know normal laws of economics do not apply to them.
Steve
As noted above, if you have more than $250,000 in a bank account, dividing it among different banks can be a prudent option. As for this:
Many brokerage accounts are insured through the SIPC, which provides similar (but not identical) protection to the FDIC in the event the institution fails. Cash balances in those accounts are insured for up to $250,000:
This serves are a reminder that if you are in a small or otherwise community bank (as big as SVB was, it still only had 17 branches), you will always have a bigger risk of such failure than if you are at a TBTLF (Too Big to let Fail) bank.
If you don’t have access to one of the big five locally, it may still be advisable to maintain a relationship with one; especially during turbulent times.
Big 5:
JPMorgan Chase.
Bank of America.
Citigroup.
Wells Fargo.*
U.S. Bancorp.
*Special mention #6: PNC, because I could never recommend anyone have anything at Wells Fargo - who in my opinion should have faced a corporate death penalty.
As of yesterday afternoon, even amounts over $250k appear to be insured. #sarcasm
I just checked with a relative of mine who works at Schwab. He said they (and TDAmertrade) do have the SIPC insurance coverage.
In addition to everyone else’s great suggestions…
A ladder of 3-month T-bills bought from Treasury Direct is essentially equivalent to cash, yields more and is perfectly safe. If you buy 1/3 in March, 1/3 in April and 1/3 in May you will essentially receive a monthly paycheck as the bills mature (with interest). The 3-month T-bills are “zero coupon” – you buy them at a discount and when they mature they return the par (face) value to you.
Of course, Treasury has many maturities of bills and bonds. The shortest is the most cash-like.
You can set up an account at TreasuryDirect.gov to buy them by EFT from your bank. But I find it more convenient to buy them in my Fidelity brokerage account. Fidelity does not charge for buying T-bills at auction from the Fixed Income section of their site.
For the auction schedule:
https://www.treasurydirect.gov/auctions/upcoming/
You can ask Treasury Direct to roll over your T-Bills so you don’t have to pay attention to the auctions. Or you can ask for no rollover so you can decide where to invest the money when they mature.
Wendy
All the large brokerages have SIPC insurance.
Treasury bills bought from Treasury Direct are not limited like stocks and bonds bought at a brokerage. These are held by the Treasury Department of the U.S. government so they are safe in quantities of millions (even trillions as bought by countries like Japan).
Wendy
Bitcoin…
just kidding.
I have puts on that fomo nonsense at moment.
Dreamer
Wendy,
Curious if you have an opinion on Morgan Stanley & Etrade?
Don’t hear them mentioned hardly at all in past few days.
Schwab getting a surprising amount of grief from stock market today, for their size.
MS is down past month and few days, of course, but still actually up YTD and roughly flat past 2 years.
Not a question about their stock…not interested in investing. Just looking at that as a sign of market trust or distrust at moment.
Morgan Stanley/Etrade do offer checking accounts you can link to your brokerage account these days. Again - not hearing much on them.
thx,
Dreamer
@LifeOfDreamer I don’t know anything about them.
Wendy
A well known and respected geriatrician says that the only truly safe place for people is in a six foot box six feet under. Cash has a similar problem, not 100% safe anywhere.
If the right one don’t getcha then the left one will.
Tennessee Ernie Ford
The Captain
Thank you, Wendy.
I already have two TreasuryDirect accounts (for DW & I) - using them to buy I-Bonds. I will definitely look into buying T-Bills.
Wells is just being Shiny. Can’t kill a bank that has size for being Shiny. Being Shiny is a “traditional American value”.
PNC got a bailout it didn’t need on the last go around. They used the loot to buy National City.
Steve
I could not care less about the bail out. I think every bank on that list took money at one point whether they needed it (or wanted it).
Wells Fargo acted like a criminal enterprise at nearly all levels, through multiple lines of business, and more than once.
Edit: This alone should have landed people in jail:
Wells Fargo continues to tangle itself in scandal. Last week, the bank admitted it forced redundant car insurance on more than 800,000 car-loan borrowers, earning the company $73 million in ill-gotten gains while causing a quarter-million delinquencies and 25,000 wrongful auto repossessions.
That behavior doesn’t happen in a vacuum. That isn’t some rogue trader losing billions. That is top down corporate culture says to their employees, “steal money from our customers or else” and the employees acting accordingly.
More:
The report, which was prepared by the consulting firm Oliver Wyman, looked at insurance policies sold to Wells customers from January 2012 through July 2016. The insurance, which the bank required, was more expensive than auto insurance that customers often already had obtained on their own.
National General Insurance underwrote the policies for Wells Fargo, which began to require the insurance on auto loans as early as 2006. The practice continued until the end of September.
The requirement to buy that insurance lasted for 10 years.
Same corruption at JPM. Jamie Dimon doesn’t care about the fines on the company, because he, personally, is never held accountable for what goes on during his watch.
Steve
The terms of Schwab’s account protection can be found here:
In addition to SIPC, they provide additional insurance through Lloyd’s of London and other insurers…
BTC and Eth have lift off.