Item — HN Reader

It's interesting that they will not accept any transfer-in, even reject a transfer, if the balance exceeds $250,000. This must be because of the FDIC insurance limit, and hence protects the consumer's savings. Quite the opposite of what some banks are trying to do: offer accounts that try to provide FDIC insurance over 250k by spreading your money among other banks.

From the footnote 1: https://www.goldmansachs.com/terms-and-conditions/Deposits-A...

    MAXIMUM DEPOSIT LIMITS
    The maximum balance for your Account is $250,000. We will include any funds deposited into your Account but not interest
    or Daily Cash you’ve earned when determining the maximum balance limit. We may reject and return any funds transfer if
    your Account exceeds the maximum deposit limit. You authorize us to return any funds that exceed the maximum balance
    limit by check.

5 comments

At what point does an investment with Apple actually become just as safe if not safer than the FDIC? Neither is realistically going to fail, but with the debt ceiling once again rearing it’s head, I have more trust in the leadership of Apple not doing something stupid than I do in the US government not doing something stupid. Governmental incompetency and dysfunction seems like a bigger risk than insolvency of Apple.

Apple has approximately $50B in cash on hand. The US government can print a trillion+ on a whim. So if there's a banking crisis I'm going to trust the FDIC to bail me out over Tim Cook (and there's a pretty strong recent precedent of exactly that).

>The US government can print a trillion+ on a whim.

To be clear, there is a difference between the ability to do something and the will to do it. That is why I referenced the debt ceiling. The government could easily spend more than the debt ceiling. It is also unlikely there would be serious repercussions to just abolishing the debt ceiling. And yet we constantly have to have the debate of whether we should raise the debt ceiling. It is a game of political theater. Are we sure something similar could never happen with a bailout big enough to save Goldman Sachs?

It's most likely $50 billion in cash equivalents, not cash. They probably have essentially 0 cash (some comparatively meaningless amount).

They are highly liquid instruments, but in a bank run, Apple likely wouldn't be any more able to convert them to actual cash than any other party.

Isn’t Goldman Sachs actually handling that money?

Yes, but it is still Apple's brand on the line. Which of the following has higher odds?

1. GS going under and Apple bails out its customers who hold these accounts.

2. GS going under and the US government bails out everyone.

Both are as close to 100% that this conversation is effectively meaningless. I just think it is an interesting hypothetical.

> Both are as close to 100% that this conversation is effectively meaningless. I just think it is an interesting hypothetical.

The first has almost 0% chance of happening. Apple will never bail out its customers for insured deposits, as that money is guaranteed by the FDIC. Why would they effectively "donate" money for free to the FDIC?

The only universe in which that happens is the one in which the FDIC somehow is insolvent and the federal government abandons the FDIC and the cascading effects of the latter (which would almost certainly create a national if not global financial crisis that makes 2008 look quaint) somehow don't affect Apple enough that they could use their additional cash on hand to pay their entire banking liabilities. Which is pretty unlikely, given that most non-banking companies don't have cash reserves that large that they can dip into at a moment's notice. Even Apple, the world's biggest company, has "only" $50B in cash on hand as of last quarter, which sounds like a lot but would not be enough to weather that kind of a crisis and still be able to make depositors whole even if they felt that it was their responsibility.

>The first has almost 0% chance of happening. Apple will never bail out its customers for insured deposits, as that money is guaranteed by the FDIC. Why would they effectively "donate" money for free to the FDIC?

Yes, this was a hypothetical based on a situation in which these accounts weren't protected by FDIC, either by design or some problem with the FDIC. Apple isn't going to donate money to the federal government. But I could see it donating money to its customers as an attempt to retain the value of its brand.

>The only universe in which that happens is the one in which the FDIC somehow is insolvent and the federal government abandons the FDIC and the cascading effects of the latter (which would almost certainly create a national if not global financial crisis that makes 2008 look quaint) somehow don't affect Apple enough that they could use their additional cash on hand to pay their entire banking liabilities. Which is pretty unlikely, given that most non-banking companies don't have cash reserves that large that they can dip into at a moment's notice. Even Apple, the world's biggest company, has "only" $50B in cash on hand as of last quarter, which sounds like a lot but would not be enough to weather that kind of a crisis and still be able to make depositors whole even if they felt that it was their responsibility.

The FDIC might not have the money to cover a failure as big as Goldman Sachs and the cascading effects (a quick Google search says the FDIC has $128b in the insurance fund and GS has $110b in consumer deposits, so it seems close at the moment). The big question is what would the US government do in response to a failure this big. Would a polarized and split Congress want to or even be able to compromise on a rescue plan? What if the issue is specifically at Goldman Sachs due to corruption or some other crime rather than an issue with the overall economic environment? Like I said, the odds of this situation are extremely low, but so are the odds of Apple accepting the destruction of their brand.

This sounds like the type of situation where money becomes worthless.

An asteroid the size of Texas just fell into the Pacific? What will happen to my FDIC insured funds!?

> This sounds like the type of situation where money becomes worthless. An asteroid the size of Texas just fell into the Pacific? What will happen to my FDIC insured funds!?

Yeah, I would be more worried about the USD itself becoming unstable than about the FDIC not paying out insured deposits.

And at that point, Apple would have far bigger concerns than the brand risk of people losing their Goldman-held savings.

Don't buy Apple Stock instead of keeping some cash in a bank account.

* If you need cash in an emergency it's possible that Apple stock will be negatively effected by the same emergency.

* Anything that causes FDIC to fail will negatively impact Apple Stock, causing you to lose a lot of the value you were trying to protect against that exact situation.

* Cash in a bank account is more liquid than a stock. It's common for the sale of a stock to result in usable cash after 3 business days. I can withdrawal from a savings account 24/7. If you have an unplanned and urgent situation cash is fantastic.

* The odds are higher than the US Government stays solvent over the next 120 years than Apple does. Governments are designed for more long term stability than companies.

Apple would suffer during a default just like the rest of us. Intimidating the majority of voters and businesses is THE point of the debt ceiling stunt.

depends entirely on how they've set it up legally

> At what point does an investment with Apple actually become just as safe if not safer than the FDIC?

Apple would have to be backed by something other than the dollar for this to be remotely possible.

That is assuming that the only reason the government wouldn't pay out FDIC insurance is collapse of the dollar (or that refusal to pay would cause the collapse of the dollar). I don't think that is the case. I would put the odds of the US government doing something stupid much higher than the collapse of either the dollar or Apple.

They’re backed by iPhones.

Google search seemed eternal unbreakable monopoly only a couple months ago.

My guess is that it has little to do with FDIC and a lot more to do with them not wanting to pay so much interest on that much money.

They're making money on the difference between their interest rate and EFFR. Therefore, no, they aren't rejecting money for that reason because they're profiting from every dollar saved through this; it isn't a charity.

FDIC is a much, much, better explanation.

No. They love savings accounts. It's money they can use in relatively risk-free ways that get them more interest than they're paying out.

Betterment is offering 4.2% in their Cash Reserve right now and they are FDIC insured up to $2 million.

https://www.betterment.com/cash-portfolio#:~:text=FDIC%20ins...).

Interactive Brokers offers 4.33% for cash above $10k. They have a very easy model of "benchmark minus 0.5%": https://www.interactivebrokers.com/en/index.php?f=46385

Insurance is $2.75M but IBKR isn't a bank and isn't subject to the same problems in the same ways (e.g. bank runs).

Wealthfront offers the same, but with 4.3% and $3m insurance

https://www.wealthfront.com/cash

I wonder if the $250k transfer limit can be exceeded by having a joint account? FDIC limit is $500k for couples jointly owning an account.

for now at least:

  HOW AN ACCOUNT CAN BE OWNED
  
  Individual Account
    An Account may only be owned by one person.
  
  Payable-On-Death (“POD”) Designation
    You may designate one or more beneficiaries (up to six) to receive the funds upon your death for your Account.

from https://www.goldmansachs.com/terms-and-conditions/Deposits-A...

Makes sense. Interest and Daily Cash goes into the checking account (Apple Cash).

And Apple isn't catering to small business here.