FDIC insurance and how to keep your tendies after your broker is rich

I wasn’t always a paranoid ape.

I watched Lucy.

I watched Wes.

I read atobitt.

I’ve read on my own how ON RRPs work and why. (We are seeing flight to quality right now!)

I told my therapist I’d die before I give up my shares.

But I have a nagging suspicion that there’s another level of greed that outpaces the hedgefunds. Yes they’re bad guys and yes they should be in jail. I have another post about this coming. But the more sinister people are the banks, the people that told Kenny he couldn’t be one of them. However John Mack, Linda Thompson, Chris Cox, however they’re all connected.

So what happens if they’ve lost it all but they’re still out for blood?

Well the I suspect the same thing that they’re going to take down as many counterparties as possible. Knowingly or out of self-preservation.

Who? The brokerages. The banks. Lehman failed. Bear sterns failed. It CAN happen and you can lose your money. Let’s avoid that.

Let’s talk about FDIC https://www.fdic.gov/resources/deposit-insurance/faq/

And a little about SIPC https://www.sipc.org/for-investors/what-sipc-protects

Some facts:

• a bank account is insured under FDIC for $250,000

• for the most part you get $250,000 per person and per beneficiary on the account

• the types of accounts this works for is mostly 3 types for apes: individual, joint, retirement.

• SIPC covers you for 250,000 cash and $500,000 equity per brokerage, same style as FDIC

Examples:

Alice has 1 brokerage account. Her broker does funky shit and goes under. She is insured for $250,000 cash and $500,000 equity.

Bob has 1 individual bank account at JP Morgan Chase and 1 joint account at JP. He is covered for $250,000 + $250,000 * (number of people in joint account).

Charles has 1 bank account with Schwab with 4 beneficiaries and another individual account at Wells Fargo. He is insured for $250,000 + $250,000 per beneficiary + $250,000.

See the pattern?

All the apes who have been trading for a while probably already know this but you should never ever consolidate your money on one bank or brokerage.

Bank runs happen. A bank run gets it’s name from the early 1900s when people would rush to the bank to withdraw their funds before the bank is insolvent. Today they happen electronically through FDIC and you are fucked until they release your funds.

To prevent this the answer is simple, put your money in as many FDIC and SIPC insured accounts as you can.

Now the problem probably lies wherein most of us have never had the kind of money that this matters. However with the evolution of the ape, we will be causing a huge problem for money markets and it’s best to insure it. So like all financial advise the best time to divest your holdings is before you invest.

But the MOASS may come soon so this is a bit of a pickle. It’s your money you do what you want with it. I endorse the following:

• make sure your accounts are FDIC or SIPC insured!

• get off robinhood, they are SIPC insured however they already have had numerous issues with falsifying records. Buyer beware.

• open new brokerage accounts with other reputable broker dealers: Fidelity, Vanguard. I use Scwhab but Lucy mentioned that they were responsible for options exchange tomfoolery with false covers. I want out!

• ACAT (transfer) shares that you are OKAY WITH BEING UN LIMBO FOR UP TO A WEEK - I will be doing a small percent at a time to limit loss exposure

• DTC transfer between brokers for 2-3 day limbo, I may do this if I feel something is wrong

• wire money same day cash transfer for a fee, do this if your bank is having issues.

• open new bank accounts that you can wire money to

• be familiar with how bank wires happen and get your bank account wire information ready to go

• Look into CDARS and ICS accounts if they are right for you. More below.

• When you sell for $10,000,000 or more contact a tax professional

• When you sell for $10,000,000 or more contact a reputable fiduciary at a reputable bank and ask how you can protect as much cash as possible without investing it in treasury bonds and without putting it into blue chips. These will be a while before you can know when they’ve bottomed.

What is CDARS and ICS?

They are sweep accounts that banks will offer to be the custodian of. They will take a large sum and be the controller for the account. The idea is it will feel like an ordinary account (but slower to use) and they will split the sum into $250,000 chunks that will be put into FDIC backed banks. They use the FDIC insurance to protect your accounts through the sweep account.

The sweep account style is often encouraged by the government as a way to limit exposure to individual bank failures.

If you use the services you can choose a reputable bank that offers it and you will be charged a fee. Alternatively you can try to do it on your own but if you want to insure $25,000,000 it will require you to open 100 new bank accounts. Which will take like 4 weeks most likely. Let the bank be the custodian and limit your exposure. Even if that bank fails they just have the records, your money is held in other banks. Your records will be sent to the entity that acquires your failed bank.

I’m writing this post to show options for trying to protect cash and securities. As always talk to a professional but be informed of the options. Hopefully this gives you an idea of how to take your cash out when your broker is rich from your diamond hands.

If any ape has corrections please send them my way. I just learned about this recently.