Episode Details

Questions from the Flight Deck:

What if the US Dollar is not the dominant world currency?

• https://www.visualcapitalist.com/cp/how-reserve-currencies-evolved-over-120-years/

Part 1:

How to know how much FDIC insurance you have?

• https://edie.fdic.gov/calculator.html?

Should we be nervous about the banking system?

• There is no safer place...

How much can I actually hold in my bank account, FDIC insured? See FCIC calculator.

Why are banks and brokerage firms different?

• Banks accept deposits onto their balance sheet. When you deposit money, it becomes a liability for the bank.

• Brokers are middlemen. They hold your money (custodial relationship) and then allow you to buy investments. These do NOT go onto the broker's balance sheet. They take a little to "broker the sales" but do not own anything. You own the underlying investments.

What would happen if Schwab went bankrupt? FDIC, SIPC.

• Rule 15c3-1, "Net Capital Rule" of the U.S. Securities and Exchange Commission (SEC), makes it mandatory for brokerages to maintain a minimum amount of prescribed capital in liquid form. Rule 15c3-3, "Customer Protection Rule," requires brokerage firms to keep client assets (both cash and securities) in a separate account from the firm's assets to avoid any confusion

• What does a broker (Schwab) do with our money versus what a bank does with our money?

  • Bank invests and loans your money

  • Schwab puts it in stocks that YOU own. Schwab doesn't hold them. Schwab can't do anything with your money. It's not even on their balance sheet.

    • However, Schwab does have a banking component. A subsidiary of Charles Schwab.

    • Schwab has several components, subsidiaries:

      • ETFs, Mutuals Funds

• • • • Custodian, Broker-Dealer

• • • • Banks

• • • Who controls money at ETFs, Mutual Funds...

• • • • Securities of underlying funds are not held at Schwab, Vanguard. They hire and pay a custodian to keep these securities separate...

• • • • • Who WAS the same – Bernie Madoff.

• • • https://international.schwab.com/account-protection

• • • Broker collapsing versus broker theft...

• • • • Protected up to US$600 million. The combined total of our SIPC coverage and our "excess SIPC" coverage means Schwab provides protection up to an aggregate of US$600 millio