Take a look at what they’re paying, last time I looked it was 0.45%. Yes, it’s FDIC, but the interest rate is pathetic (or was. We still have three: her, me, joint). And yes, I still use them, but only as someplace I can throw dollars in (literally) a second. Otherwise I’ve found their page full of CDs at banks in any duration I want, and the two main money markets, SWVXX (Schwab) and SNSXX (Treasury backed fund). Both of those are paying over 4%; depending on the amount you have there, however, it may only have SIPC protection.
Schwab’s big profits lately have been from lazy people with money sitting in their bank, earning pitiful interest, which they turn around and invest at far higher rates and pocket the vig. Nothing wrong with that, but … don’t be lazy. It’s free money, either for them or for you.
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I mindlessly held a position in a micro cap bank that I inherited in 2015 solely because it was our town bank back in the fifties. It took 8 years to triple in price and about 6 weeks to fallback to my starting point. Maybe I should have paid attention when Buffett unloaded all those bank stocks 2020-2022.
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And, strangely enough, already done. The Fed has already said they would buy any US government securities (Treasuries, Fannie, Freddie, etc) at face value rather than current market value. That provides the needed liquidity to handle falling deposits while also shoring up bank balance sheets.
Beyond that, they’re undoubtedly keeping a short leash on banks. If assets fall to equal deposits, they’ll shut down the bank in a heartbeat, keeping depositors whole. Then sell off the assets and deposits to healthier banks. No one loses money except investors and general creditors. If your bank has gotten to that point, investors deserve to be wiped out. The FDIC isn’t there to protect investors, just depositors.
–Peter
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