vincecate wrote:They bailed out the rich bankers. If they don't insure the little guy's brokerage account, after telling him it was insured by the government, there would be hell to pay. I think it will be easier for the government to just print money and cover the little guys who vote than to let them lose if the broker goes under.
Bank accounts are for the little guy and brokerage accounts are for the guys who have extra money to gamble with. Nobody will sympathize too much with anyone who has money to gamble with and has lost it. Brokerage accounts aren't insured in the same way bank accounts are and nobody is saying they are. The article I posted by the Chicago Mercantile Exchange above is correct on all points when they say:
In recent years, many investors found out the hard way they have very little recourse to recover funds in the event of a financial firm's bankruptcy. Although the Bernie Madoff "hedge fund" was by far the highest profile case, there were numerous less publicized bankruptcies and defaults at other firms and investments (including legitimate ones), in which investors found recouping remaining funds difficult or impossible. Sometimes it's a case of being the last in line of a long list of creditors, a problem that's compounded when customer funds aren't separated from a firm's funds. Such "commingled" funds might have been used to fund the firm's operating expenses or in its own trading. If a firm enters bankruptcy, it can be very difficult or impossible to recover customer funds that were commingled in such a fashion.
When investors dial into Bank of America's brokerage arm, they tell you in a recorded message each time that accounts are not insured by the FDIC and may lose value. That includes the cash in the account because those are money market funds and they can break the buck. In 2008, the Fed backed those because SIPC does not insure them.