ZachPruckowski

Looking at your thought experiment, the difference is whether that customer gets $500K (all of the bank's assets are sold to make him whole[1]) or $1M - all the banks assets are sold, and also he gets another $500K from the FDIC.

[1] - the $250K insurance is normally only supposed to apply if there are insufficient assets to cover it. Unless I'm misunderstanding your wording and the bank in the thought experiment has $750K in assets.

> "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

Very curious to see who ends up paying this special assessment. Are we all going to pay in lower deposit/investment interest from banks? Are bank shareholders/profits gonna eat it?

> I hope the FDIC is able to get a substantial dividend quickly so that they can keep operating and that everyone works to keep disruption low

The FDIC has publicly said there will be an advance dividend and I don't see why it wouldn't be substantial, given that there's going to be a LOT of recovery unless SVB has big non-public problems.

I mean, yeah, that's ultimately a potential problem for the federal budget. But that's not what tripped up SVB - long-term Treasury prices declined because higher interest rates made short-term Treasuries more attractive than long-term ones.

I mean, completely reducing this risk to 0 is probably expensive and annoying, yes. But you could halve the risk by splitting your money into just two bank accounts, and reduce it further by keeping medium/long-term savings in short-duration no-coupon T-Bills or something.

> "This isn't some sort of complex bid call option strategy"

Exactly. And "don't put all your eggs in one uninsured basket" is the exact sort of 101-level business advice I'd expect the experienced hands at YC or any Angel investor to provide pretty routinely.

They actually had like $12B split across 5 or 6 banks. But yeah, they definitely could've split it better. "No more than $1B per bank" seems like an easy rule, and even maxing at $500M could be doable.

Well and it's not just that they had money over the insured amount in a bank. It's that they had ALL of their money in ONE bank. If they had $500K in three different banks instead of $1.5M in one bank, there would still be a risk, but it would be that they'd lose $250K if any of those three banks failed, not that they'd lose $1.25M if one particular bank failed.

(And obviously actual losses are gonna be like 20% here, not 100%, but you get the picture).

Not just any initial capital, clean US dollars in a brokerage account under somebody's real name. You can't use BTC or rubles or drug money or whatever.

>When Musk posted a tweet 'joking' about taking Tesla private, which was utterly trivial to investigate, the SEC only managed to deliver a slap on the wrist.

Because prosecuting Elon Musk requires going up against top tier defense lawyers and proving things like "Musk tweeted this with the intention of impacting his stock's value" or something.

With hackers, you can use the financial stuff to target the hackers, and then either (a) prove the computer crimes or (b) use the computer crimes and the surrounding stock sales to prove intent. You also don't have to go up against a legal defense better funded than some militaries.

>Of course, insider trading among well connected hedge fund managers and our unaccountable financial elite is indeed pervasive and goes by without being prosecuted all the time

And a lot of those non-prosecutions involve either (a) civil fines, (b) the compliance department censuring or firing the relevant employee, or (c) the Feds backing down from a fight with a big white shoe defense firm. None of that applies to these Twitter hackers.

I'm not sure this works. A lot of the folks who're short on Tesla are big names with trading records who've been short on Tesla for a while. If you roll up and your first stock trade is to buy some short term put options right before the hack and then cash out immediately[1], that's going to be distinguishable and suspicious.

Any efforts to defer that (using a patsy with an established trading history, buying longer-term options, buying them earlier) cuts into your margins, and may well not work (since again, you've got to be the first one out since you know it's a momentary dip).

[1] - Remember, you know this is a momentary dip because you know the hack is going to get discovered soon, but the other investors don't know where the bottom is.

In the aggregate sense, it eventually netted out. But a lot of people who sold when it looked like prices were collapsing sure got a pretty decent chunk of their bank accounts "erased".

I know, right? I work with a lot of politicians and they run the gamut from "tech savvy 30-year-old" to "grandpa who still uses AOL". Any product which wants to appeal to the entire population needs to be able to explain itself to that range of people. If you want to move beyond the bleeding-edge techie crowd and the Millenials you've got to be able to sell yourself to the people who don't grow up with computers.