How to Get More Than $250,000 Insured by the FDIC

When Silicon Valley Bank (SVB) experienced a bank run and was abruptly closed and taken over by the Federal Deposit and Insurance Corporation (FDIC), a whole lot of money was at risk.

Apparently, about 96% of the cash deposited at the bank was uninsured. That is to say that the vast majority of accounts held much more than the $250,000 that the FDIC guarantees will not be at risk in the event of a bank failure.

This made for an exceptionally anxious weekend for many Silicon Valley startup companies, founders, and other account holders. Fortunately for them, and for many other banks who might have experienced similar problems if actions weren’t taken, regulators chose to make depositors at SVB (and Signature Bank which also failed) whole by guaranteeing all deposits would be honored.

There was no guarantee this would happen, and if it hadn’t, billions of dollars that had been deposited at the bank could have been lost and only partially recovered. As it stands, tens of billions in bank debt and equity (as owned by shareholders and debtors) is now gone.

Lessons Learned

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What have we learned from the biggest banking crisis since the Great Recession? For some, the takehome lesson is that there’s little need to worry about deposited money. The government will step in and make us whole.

While that happened in this case, and it may very well happen again, I wouldn’t count on FDIC insurance being infinite. What if 10 banks had failed? Or 100? Some see it as a vote for decentralization and a cryptocurrency use case.

For me, the takehome lessons were that bank runs can happen more swiftly than ever thanks to social media, banks can still fail in relatively good economic times, and that I’d best make sure my cash savings is not at significant risk.

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