In a properly regulated world, all of these clowns would be shut down today and some of them would go to jail.
Instead we do no regulation, these "not-banks lying and claiming your money is safe" get to harm a lot of people, and the public further loses trust in everyone involved.
To anyone reading this who has money in any business that claims not to be a bank but instead your money is super-safely stored in a real bank somewhere and so there's no risk to you: run away, run away fast. Get your money out and close your account. You're in a Ponzi scheme and you don't realize it.
In a properly regulated world, everyone would have some sort of personal insurance for counterparty risk. You pay $x per year and the government never steps in.
FDIC is a moral hazard in my opinion. The only thing the government should do is let people with low incomes claim their money back in advance so that they can pay their bills.
Both Wealthfront or Betterment are not banks but offer high-interest cash accounts that are FDIC insured. I've been curious what would happen if your money disappears from one of these high-interest cash accounts since they are technically not banks.
Reading through Betterment's disclosure acknowledges the scenarios for potential loss. While the deposits are stored through their program banks, you're guaranteed up to $2mm in FDIC insurance. So if those banks go under, your money is as safe as it would be anywhere else.
What I did not know is that FDIC insurance doesn't apply while money is being _transferred_ between accounts (SIPC insurance apparently applies here).
Neither Wealthfront nor Betterment appear on the FDIC’s own list of insured institutions, so my guess is that if something wrong your money could disappear between the cracks, as in the example in the article.
There are very strong guarantees of that not to happen.
Wealthfront and Betterment are tiny compared to others, but share the same field with the big players who have interest to not make people scared shitless.
It is the fast and loose, innocent because proving guilt is an effort, fintech I am sacred of: crypto, binary options etc.
The whole point of Bitcoin was to not need banks. You can be responsible for your own money. You can use a secure hardware wallet (with backup seed in a secure vault) and not have to worry about FDIC insurance. But most people seem to prefer risking all their money with an unaccountable third party over these relatively easy security measures. So now we have uninsured crypto banks. I get how this happened but it's kinda sad.
> The whole point of Bitcoin was to not need banks.
I don't know man the fact that 0.0000000000000001 quectoseconds after the first bitcoin was mined all of the techbros set up exchanges so they could cosplay as Gordon Gekko while rubbing their nipples and moaning "arbitraaaaaaaaage" kinda calls this into doubt.
Anyone who thinks the typical consumer has the ability to operate/secure/assure a bitcoin wallet to a level equivalent to or better than a bank is delusional: there are crypto founding fathers who have been burned.
To exercise great opsec, one would have to be a psychopath. Most folks aren't, hence at least in the US, banks aren't allowed to excuse themselves by customer's lack of opsec ("regulation E").
The effective monopoly that banks has gotten isn't free to them, even if they do try very hard to avoid paying the cost asked.
I'm considering using Mercury,* which is allegedly quite popular with startups. They do have all the usual KYC etc of a bank.
Like the ones discussed in the article, Mercury also keeps customer funds in Evolve, among other banks (I guess they claim to spread your money around so you don't have more thank 250K in any one basket). So if I understand correctly, the problem is that I have no visibility to the back end, so if Mercury keels over I'll have trouble getting my money?
* I used SVB for 25 years, but over the past few years their service declined and First Republic poached a lot of their good guys, so I switched to FRB. With a track record like that, perhaps Mercury should reject me?
"Mercury is a fintech company, not an FDIC-insured bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust ®; Members FDIC. Deposit insurance covers the failure of an insured bank." - from their website
What they're trying to say here is YOU ARE NOT INSURED IN ANY WAY IF MERCURY STEALS YOUR MONEY.
No. The depositor has a relationship with Mercury. Mercury has relationships (directly or indirectly) with FDIC insured banks.
Even if one could prove a direct link between the depositor and the FDIC insured bank (making the insurance relevant), the depositor has given Mercury the right to move money in and out of the FDIC insured accounts.
Even if one could prove the money was illegally taken, FDIC insurance is for bank failure. Not for theft.
So then Mercury waving a big flag about how accounts are FDIC-insured is more about them being made whole if one of the banks they contract with goes under, not about ensuring that their customers are ultimately made whole?
The big risk is that Mercury goes out of business. This leaves the bank with money in Mercury accounts but no way to get back to customers. The funds may be considered to be the companies in bankruptcy, when means that customers would have to wait and may not get back all their money.
The thing you need to Google is "Reg E", which the partner bank (and through them, the fintech program) need to follow. This covers things like losses through card fraud.
In my experience building a fintech on Evolve this description of the relationship is incorrect. My customers have accounts at Evolve directly and are FDIC insured.
As to what that insurance covers that is indeed a different question.
My company uses Brex among others. They do nightly sweeps into a set of partner institutions on your behalf. In theory means you are covered for $250K * number of banks, but the scheme is pretty opaque. It's also untested by a real failure as far as I can tell. The best mitigation is to spread accounts across multiple institutions.
p.s., Brex works fine for day-to-day transactions like AR, AP, and Payroll. We've been quite happy with it, but these days you can't fully trust any financial institution.
Do they offer the sort of cash management that is Mercury's hallmark?
Separately, I have heard a lot of bad things about Chase, and experienced some as well over the years. I'd be hesitant to open up an account there from a customer service perspective, although I assume the deposits would be safe at such a large mega-bank.
JPMC bough First Republic and already I’m ready to leave. Fees are high and many, and there’s no direct relationship like there was with SVB or FRB. Just a call center.
The marketing I got from Chase after the buyout made me realize they may know what assets they got, but not what customers.
True, I am not wealthy enough for Chase to care, but they send me marcom as if I had zero understanding of finance, to the point of it being offensive.
I am in the process of moving my personal accounts out, to another bank who is willing to put me in the correct cohort (I realized I’m paying them ~$500/year for that btw. Which is very little considering the costs). My mortgage would stay at Chase, because of interest rates, and I’ll have to keep getting marcom that assumes I think of it as a IOU and not a financial instrument.
Were you using FRB for private banking or commercial banking?
Private/Relationship banking might be lackluster with JPM depending on your account size.
Idk if I'd trust a non-FDIC insured bank and any bank that isn't Basel 1/2 compliant so most Neobanks seem too risky. They anyhow prefer to use state chartered banks which tend to be significantly more brittle than nationally chartered banks.
I had both. I switched my personal to the Sanford credit union (I don’t keep a lot of cash in my account anyway).
I’m not sure what to do about my startup’s account though. Chase doesn’t seem to understand startups anyway — you’re a small business or a big business. For the company’s money I want someone who gives a shit.
For your startup, check out HSBC as well then - a lot of SVB and FRB staff specialized in tech commercial banking switched there as well.
Also maybe try and find where your former SVB banker with whom you had a relationship went - they could help with the transition and give you the care needed.
I was reading through the Synapse bankruptcy court filings, and oh jeez, is this a mess:
> Synapse often used multiple Partner Banks to service different functions for the same Fintech Partner. In certain instances, end user deposits through a Fintech Partner were deposited in an account at one Partner Bank, while end user withdrawals through that same Fintech Partner were processed from a different account at a different Partner Bank. This business model makes it both essential and difficult to reconcile transactions and ensure end users receive access to the correct amount of funds due to each end user.
This fintech product model, with multiple intermediaries and service providers between end users and the depository banks, is a house of cards. Is running your bank-like financial services product as an actual bank that hard? These technology companies seem to want all the upsides of being a bank, with none of the responsibilities.
From my perspective, the big gap is that these depository banks aren't maintaining the customer and transaction data for the beneficial owners of the money they have on deposit. They seem like they should be the ones ultimately responsible for safeguarding the customer's funds. In the middle of this, the Federal Reserve dropped this gem about KYC non-compliance for one of the banks involved, swearing that it has nothing to do with the Synapse bankruptcy.
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more than 50% since 2010 or 2012, iirc, but this only tells the official story.
when a "99 cents!" bag of chips is now "$2.99 only!" and the price of fuel doesn't correlate to anything except oil company P&E charts...
Just remember, The "$6 burger" was both making fun of the fact that restaurants charged $6 for a hamburger, as well as less than $6 for the entire meal (usually ~$4 al a carte). That food place ceased offering the $6 burger when the meal went over $8, and that was over a decade ago.
I got quoted out $1000 for 200 feet of garden hose from a hose supplier last week. meanwhile the state government has only given ~6% pay increase in the last decade to civil employees. in the last 12 years i've reduced my electricity usage by 60% by both moving high power stuff to a cheaper facility and buying more energy efficient appliances and such. My electric bill is the exact same (plus or minus 10%) as it was 12 years ago.
I could go on comparing what things used to cost to what they cost now (if you can even get them at all), and my spreadsheet says the "inflation" numbers we're given either are flat out lies or otherwise so misunderstand what people spend money on monthly that it may as well be a lie. Compare a 198X Ford Mustang 6 cylinder base model to any year model you please. Then convince me that moving from metal to plastic and computerizing everything so the wires can be much smaller somehow justifies the price hike, there.
p.s. don't do this with rent or mortgages unless you want to cry.
That whole safety thing probably increases the price a lot. Like crumple zones and airbags. Also what's the zero to sixty and quarter mile on a 1985 Mustang compared to a Honda Civic from today? Also how long did it last between oil changes, how many MPG did it get, how much routine maintenance did it need; etc, etc.
The 1985 Ford Mustang was an amazing feat of engineering - for its time. We're 40 years past that though, and cars are more expensive for a lot more reasons than just plastic. Nevermind the plastic, the metal used in today's cars didn't exist as little as 10 years ago, never mind 40.
>Also how long did it last between oil changes, how many MPG did it get, how much routine maintenance did it need; etc, etc.
3000 miles unless synthetic then 5 or 6 (same as my 2012 lexus with a simlar sized engine), 17-18MPG (same as my lexus), and "if you have a wrench and a Haynes you're halfway done".
hope this clears up some things.
eta: the 0-60 i am not sure, i'm sure my car with a 4.6 liter is faster and isn't governed at the same speed as the 1985 mustang, but it's not an order of magnitude faster or anything - the mustangs with large engines were always "fast" and relatively safe. I've owned 3 from the 90s and wrecked two and walked away with nary a bruise from insurance totals.
also if i drive intending to "Hypermilage" i can get nearly 30MPG out of my lexus, but i could get ~30 in a Mitsubishi Evo X and a F-550, too. Daily driving is <20MPG on all those. For reference on a 1.6L i can get nearly 80MPG on certain roads, and always above 65MPG. It annoys everyone around me though, so i tend to only do it if i am driving across country, which is the boringest thing ever.
The 2024 Honda Civic gets 10,000 miles between oil changes, and 30+ mpg, with a 0-60 and quarter mile that's competitive with a 1985 Mustang. Plus a ton more safety features, and without weighing a ton more because of them; it's about the same weight as well.
Hope that clears up why cars are more expensive today.
I see this view a lot, but every time I look at the actual data it isn't borne out.
BLS official inflation: $100 in Jan 2010 had the purchasing power of $144.94 today. That works out to 2.6%/yr by my math. So that's the "official" number that we want to disprove
Gallon of gas: $2.77 in 2010, $3.20 in Jan 24. 15% increase, 1% annualized
Honda Civic [not doing Mustang because it's harder to find data and as a luxury vehicle the comparison isn't as clean]: $16,205 in 2010, 24,000 today. 50% increase, 2.8% annualized
Big Mac: $3.73 in 2010, $5.69 today. 52% increase, 3% annualized
I live in an HCOL area, and did in 2010, so both of these sets of numbers feel a little low to me, but they mostly match my experience. As far as I can tell inflation mostly matches what the government reports, with some sectors coming in under and theoretically balancing out those that come in over (the classics of education, medicine, and housing). Those sectors that are outpacing are a real problem! But I think the consumer goods shadow-inflation people complain about is not borne out by data.
when i moved to louisiana in 2013 gas was <$2. it's routinely been $1.29/gal. It's currently $3.50 a gallon. I can cherrypick data, too. In 2010 i was buying literal jet fuel for $8/gal in california, gas prices in the intervening 14 years have approached that at service stations in california. (i have pictures, but why bother uploading)
McDonald's subsidizes their food with drinks; regardless, though, inflation (in last decade only) on McChicken is 199%, mcdouble 169%, medium fries 138%; taco bell: 5-layer 132%; popeye's mashed potatoes 134%. See? onion-picking the big mac as the basis makes inflation "look better"
My car insurance is double what it was in 2014. My electric bill is easily 60% more expensive than it was in 2014, i said that already. That's more than double the 2.6% BLS numbers.
we can go around all day, but citing the government for numbers about inflation seems counter-productive.
anyone else notice how few fireworks were going off prior to july 4th? or after? Is that normal?
I was going for sources that could be cited -- for instance, I could only find reliable data on the Big Mac because of the Economist's famous index thereof. If you have a good source for historical McDonald's prices I'd love to see it and compare.
Without having some data to compare I cannot differentiate between (1) you are correct, (2) you are misremembering, or (3) you've experienced the inflation you claim, but for particular reasons (eg, you got a nicer car, or, your area had an influx of high earners).
Also, a small nit: by my calculations 60% growth over 10 years is 4.8% annualized - outpacing CPI yes, but not more than double.
I know it's not really your point, but what kind of hose? I bought 100' of 3/4" "contractor" hose from Tractor Supply this last winter for $79. Even the in-ground stuff doesn't cost that much.
3/4" oil and weatherproof reinforced double wall hose, the kind that lasts a decade with heavy use (at least, i have one that's 12 years old that i haven't had to repair at all). For the "better than contractor from TSC" it was $413 for 200', which is oil and weatherproofed double wall hose, but doesn't have the anti-collapse webbing between the layers, just the water carrying layer and the outer protective layer.
ETA iirc home depot has 75' for $30 for, uh, passable garden hose. I understand we can buy cheap stuff but even the cheap stuff is more expensive than it used to be.
Instead we do no regulation, these "not-banks lying and claiming your money is safe" get to harm a lot of people, and the public further loses trust in everyone involved.
To anyone reading this who has money in any business that claims not to be a bank but instead your money is super-safely stored in a real bank somewhere and so there's no risk to you: run away, run away fast. Get your money out and close your account. You're in a Ponzi scheme and you don't realize it.