Inside The Government Seizure Of Signature Bank
- Scott Shay's central claim is that Signature Bank had ample liquidity and capital when the government took it, and the arithmetic is deliberately simple: “we had $34 billion in cash and liquidity, and on Friday we had an $18 billion run… even cavemen could probably do 34 minus 18 equals 16.” Over the weekend the bank raised another $20 billion, “and astonishingly, the bank was taken.” His challenge to listeners: “you tell me what it was about.”
- Shay says the Fed’s rate hikes had nothing to do with Signature’s failure. Signature’s March 1, 2023 balance-sheet filing—less than two weeks before the takeover—was mark-to-market positive, because “one thing that was clear to me… was that rates were going to go up.” He criticizes “haphazard and careless” financial journalism for not checking the filings and recommends reading Nick Carter’s work on Choke Point 2.0.
- The discussion points toward hostility to crypto as a possible regulatory backdrop, but Shay does not state a definitive cause for the takeover. He says Silvergate was shut because “they didn’t like crypto”; Signature had made itself crypto-friendly, and its Signet system processed around $1 trillion by the end of 2022, when the bank earned almost $2 billion pretax.
- His new venture, N3XT, is a nonfractional bank built as the lesson of the takeover. All deposits sit in very short Treasuries—“not repo, not anything else”—with direct government credit on all deposits, so, in his design, there is no need for $250,000 deposit insurance or a lender of last resort. N3XT is B2B; Shay says any business can open an account and that it is now launched.
- The thesis Shay presents is that “non-fractional banking is a revolution whose time has come.” Where some conference participants are integrating with TradFi mega-banks, N3XT uses a blockchain core ledger and claims to follow Satoshi’s vision: “when you move a dollar at N3XT… you actually move a dollar. You don’t move a promise to pay.”
- The career backstory is pedigree for the claim. Shay started Bank United of Texas with Lou Ranieri in 1988, bought it as a distressed roughly $1.5 billion bank at effectively zero after the government made its assets equal its liabilities, and grew it to $20 billion or more before its sale; it is now part of JPMorgan Chase. He also started Merrick Bank, helped build the forerunner of Camden Property Trust, and grew Signature from its May 1, 2001 founding to $110 billion in assets with no acquisitions. His advice: “You can survive almost anything in business except having a bad partner.”
- He will not identify who ordered the takeover—“I have suspicions, but I’m not going on the record”—even as host Avi Felman baits him with a name that rhymes with “Loren.” Shay says he had to testify and told them “the bank shouldn’t have been taken,” but says nobody followed up, including reporters.
1. Salomon Brothers, Lou Ranieri, and the partnership rule
- Shay started in bank M&A at Salomon Brothers during the Liar’s Poker era. He taught pro-forma accounting to the training class Michael Lewis attended and bought a first edition as soon as the book came out “to make sure that I wasn’t mentioned.” Asked whether Salomon was as crazy as the book suggested, he answered: “Yes.”
- Ranieri, whom Shay says was the only person portrayed favorably in Liar’s Poker, became his lifelong partner. Shay recalls Ranieri forcing a trader to return a 3% spread on a client’s essentially riskless trade because “I’m not going to let you, as a trader, make a penny.”
- In another example, after Shay and Ranieri bought defaulted credit cards with a payment due if returns exceeded a 25% IRR, the seller bank failed and the portfolio passed through about five successor banks. Once the portfolio was liquidated for a large profit, Ranieri tracked down the successor bank to hand over the money. “He just would not take a penny that wasn’t his.”
- Shay’s advice to younger listeners: “You can survive almost anything in business except having a bad partner.” Finding a partner you are “totally simpatico with” is “the most important decision you can make.”
2. Bank United to Signature: over-branched, under-banked
- Leaving Salomon to follow Ranieri, Shay bought Bank United of Texas in 1988—a roughly $1.5 billion distressed Texas bank that had lent heavily against declining real estate. The government put in money to make the assets equal the liabilities, after which Shay and his partners bought it “basically at zero” and built it to $20 billion or more before its sale. It was later sold again and is now part of JPMorgan Chase. Along the way, Shay also started Merrick Bank and the forerunner of Camden Property Trust.
- Signature, founded May 1, 2001 with Joe DePaolo and John Tamburlaine, was built on the thesis that “New York was over-branched and under-banked.” Large banks served huge corporations and mass-market retail but were less responsive to the middle market. The pitch was: “You’re not going to be able to get Jamie Dimon on the phone, but you can get me”—fast answers, including fast no’s.
- Shay’s proudest proof point: Signature reached $110 billion in assets and “never did an acquisition… all organically.” Growth came by adding people rather than acquiring clients or another bank.
3. The crypto pivot and Signet
- Shay’s penny-drop moment was 2013, when he became captivated by the confluence of cryptography and blockchain. He contrasted blockchain’s potential with incumbents such as Fidelity, FIS, Fiserv, and Jack Henry, which he said were using “COBOL and C++ from the ’70s and ’80s.” He went on CNBC as “a blockchain maximalist. I wasn’t sure about Bitcoin, but I was sure about blockchain.”
- By 2019, he had created Signet, which he describes as the first 24/7 blockchain-enabled money-transfer system. Around $1 trillion had passed through it by the end of 2022, and Signature earned almost $2 billion pretax that year. Felman confirms the client appeal: “We were a very happy client,” mainly because almost nobody else would bank a crypto business.
4. The takeover: Shay’s case that Signature was liquid and capitalized
- Shay’s caveman-finance case begins with Silvergate being shut by the government “because they didn’t like crypto,” on a Tuesday “or something,” as he recalls. The day before Signature’s run, the bank was up in deposits for the quarter and had announced $34 billion in cash and liquidity. Friday’s $18 billion run followed Silicon Valley Bank actually running out of money: “34 minus 18 equals 16.” Signature then raised $20 billion over the weekend, yet “the bank was taken” and, Shay says, had “plenty of capital.”
- On the rate-hike narrative, Shay says: “The Fed hiking rates had nothing to do with anything.” Signature’s March 1, 2023 filing was mark-to-market positive. He criticizes journalists for not doing the basic work of checking the financial statement and recommends reading Nick Carter, citing an article whose title he recalls as something like “Signature Bank Didn’t Have to Die.”
- Shay calls the takeover “the most traumatic” period of his life, while distinguishing it from his parents’ deaths because he knew he would eventually get better then. He says the government has “this whole mechanism for hounding and destroying people,” which he calls its “superpower.” He also says the nerve in his left eye began deteriorating shortly afterward. The dental implant he was scheduled to receive on the Friday of the run was never put in; he calls it his “tattoo” and a reminder.
- Shay says he had to testify and told them “the bank shouldn’t have been taken,” but says nobody followed up, including reporters. Asked who made the decision, he said: “I have suspicions, but I’m not going on the record.” Felman floated a name rhyming with “Loren”; Shay did not confirm it.
5. N3XT: nonfractional banking to avoid the choke point
- Shay says Choke Point 1.0 and 2.0 operate through fractional banking. In his example, five depositors each put in $10, the bank lends out $40, and everyone believes they still have the same $10. A stress event therefore requires a lender of last resort. Since deposits are insured only to $250,000, he says the government can withdraw insurance and “shut a bank literally with no notice any day,” with no recourse.
- With co-founders Jeffrey Wallace, Orel Bonnell, and Kyle O’Donnell, Shay says N3XT puts every deposit into very short Treasuries—“not repo, not anything else”—and keeps the exact Treasury receipt. He says this is better than a money-market fund because the bank can present the Treasury directly, giving deposits direct government credit and making $250,000 insurance unnecessary. He also promises 24/7 payments “10x better in terms of beauty than Signet ever was.”
- Shay contrasts this with conference participants integrating with TradFi mega-banks—“JPMorgan is everywhere.” N3XT instead makes its core ledger a blockchain, with immutable records, and he says it follows Satoshi’s vision that rejected fractional banking. “When you move a dollar at N3XT, at our bank, you actually move a dollar. You don’t move a promise to pay.”
- Shay says N3XT is B2B, that any business can open an account, and that it has moved from a soft launch to being launched. He also hints at theories about Satoshi’s identity for another conversation.
Full transcript
We had $34 billion in cash and liquidity, and on Friday we had an $18 billion run. But you can do the arithmetic. Even cavemen could probably do 34 minus 18 equals 16. Then, over the weekend—and this is public—we raised $20 billion.
Right.
And astonishingly, the bank was taken.
Right.
So you tell me what it was about.
We've got a fun one. This is a little bit different from the markets talk, but it's going to be interesting. We've got Scott Shay here, who's the founder of Next, a new-age bank, who's been in this sector for a long time and can tell us whatever we need to know about it. Thank you, Scott, for coming on the show. This is fun.
Yes, it's nice to be the 2,000-year-old man.
Tell us a little bit about your career. You are a lifelong—I don't know if you'd consider yourself a lifelong banker, but maybe tell us a little bit about where you started and where you are now.
Yeah, I guess I became a bank nerd.
Yeah.
I founded the first bank with Lou Ranieri, who some of your listeners may know.
Wait, he's the guy from the book?
He is.
From Liar's Poker?
He is one of my closest friends.
Really?
And he was the only person portrayed favorably in Liar's Poker.
Yeah, no, that's—how'd you meet him?
1. Inside Salomon Brothers
I started my career on Wall Street, at Salomon Brothers.
Okay.
If anybody remembers Salomon Brothers from those days, it was a legendary firm. I actually met Lou for the first time because I was working in bank M&A. I was the bank deal guy. He was on the desk, and famously, Lou was promoted from the mailroom, so he truly came from the bottom. He asked me to help out on a deal. One of his clients was doing M&A, so I went to help him, and from then on, we became lifelong friends.
Oh, wow. So tell me about the—
And partners.
So you were recruited for Salomon Brothers—
Yes.
—in bank M&A?
Yes.
Was it—was it—
Or M&A.
Is it as crazy as—
Liar's Poker?
Like Liar's Poker. But was it—
I was—
Was Liar's Poker real? Because you were kind of there at the same time.
Not only that, but I was actually taught—I had only been at Salomon Brothers for a couple of years, but I ended up being the teacher for the training class that Michael Lewis was in.
Oh, no way. So what does being the teacher involve?
I had to teach them how to do pro formas, which none of them got. None of them understood. They didn't know why they were doing it. They were bond salesmen, but for some reason, I was the Portia McGehee that was supposed to teach them about bond, about bank pro forma accounting.
Right. I guess you were hiring people from across the board, so they weren't taught this in college. Now, when you apply for a bank role, you've got to know all this stuff already.
Yeah. It was fun, and it was the era. When Liar's Poker first came out, this was in the old days when they still had Barnes & Noble and all these bookstores. I went out and literally bought a first edition of the book. As soon as it came out, I bought one and paged through it to make sure that I wasn't mentioned. I was so happy I wasn't mentioned.
Yeah.
But I was there for 1 or 2 of the events.
There were a lot of people who got called out and had shots fired at them in that book. What's funny about the media sometimes is that they try to paint something in an unfavorable light, and that ends up making you want it more.
Yeah.
Liar's Poker and The Wolf of Wall Street are great examples of this.
Yeah. Well—
They tried to make him look bad, and they actually made him look like the coolest guy on the planet.
Yeah. Lou came out looking good.
Yeah, Lou did.
He always did the right thing by clients, and there are very few people on Wall Street who will always do that. One of the stories I was there for was when someone made too big a spread on a trade for a client. They were trading basically a riskless trade, and they made 3%.
Mm-hmm.
Lou said, “You've got to give all the money back. I'm not going to let you, as a trader, make a penny.” The trader was aghast, and half the firm was aghast, but Lou did that. I saw him do it other times. You learn about people that way.
As a segue—and this isn't what we're here to talk about—one time, I later became partners with him, and we bought a portfolio of defaulted credit cards. We ended up making a ton of money. The people who were selling it to us—the bank was in trouble—said, “We know you're going to make a lot of money on this, but give us 25% of the amount you make over, if you make over a 25% IRR.”
So we said fine. That bank ended up not making it. It was sold to another bank, then sold to another bank, and it was about 5 banks later that we'd liquidated the portfolio and made a gazillion dollars. We couldn't find anybody to give the money to.
Mm-hmm.
Lou said, “We're going to send somebody to whoever the successor bank was, and we're just going to hand them a check.” That was the kind of guy Lou was. He just would not take a penny that wasn't his.
But did anything end up coming out of that, or was it purely out of goodness? I mean, I can't imagine it was purely out of goodness.
No, nothing came out of it. It was purely out of goodness. That's Lou Ranieri.
That's pretty—I mean, nobody was like that on the Street, definitely not back then. These were the days of Gordon Gekko, right? Greed is good.
Yes.
So—
And he was just a totally different guy. He could have a good time, too.
Right.
Don't get me wrong.
Was it as crazy as everyone says?
Yes.
Yeah?
Yes.
You guys were going out and taking Manhattan by storm.
I didn't do that.
Okay.
I just want to let you know.
Fair enough.
I didn't do that. I also tell my children I didn't drink beer in college.
Is that really—
I just want to be sure you know that. I want to go on the record: I did not drink any beer in college.
That's good. That's going to be a great clip. We're going to clip that. We're going to say, “Former Salomon trader says he did not drink beer in college.”
Right.
No, this is important stuff.
There were no polygraph tests on this.
No polygraph tests—
Okay, good.
Trust me. Just—
Okay.
People will be able to see you, but that's it.
Right.
How about this? You leave Salomon Brothers and start a bank—
Yeah.
—with Lou Ranieri. Tell me about that process. What was it like? I don't know, was everyone starting banks in—
No.
—or what was this?
No. It had never been a thing.
Exactly. I say that kind of knowing the answer, but it's tough to start a bank.
Right. It's not easy. We started it in December '30. We started Bank United of Texas in 1988, and it was about a $1.5 billion bank. We bought it as a distressed bank, and we turned it into a $20 billion bank—maybe more, actually, by the time we sold it. It ended up getting sold and sold again. Today, of course, it's part of JPMorgan Chase.
Mm-hmm. Yes.
Then we started another bank called Merrick Bank, which is a credit card bank.
I want to get into that, though.
Yeah.
So you bought a distressed bank.
Yes.
What was wrong with it? What was the issue you were looking at? What were they failing to do properly?
In that bank, the basic issue was that it was a Texas bank that had lent heavily on real estate, and the real estate was worth a lot less than what they had lent. It was the classic case: the assets weren't worth the liabilities. The government had to put in money to make the assets equal to the liabilities. Then we bought it basically at zero.
Assets equal liabilities, and then it was on us to succeed or not succeed.
Why would you leave Salomon to go buy a bank that’s going under?
I left Salomon to follow Lou. The one thing in life that I learned—and I don’t know who all of your viewers are—is that if you find a business partner who you’re totally simpatico with and trust, you’re going to figure out how to make money.
Mm-hmm.
Or you’re at least going to enjoy each other’s company.
You’re going to have a good time.
You’re going to have a good time.
You’re going to have a good time.
Lou and I were totally simpatico. He was the big-picture guy at that point, and I was the guy executing. We ended up doing a lot. We bought Bank United of Texas, and we started the forerunner of a large real estate investment trust.
That wasn’t even a thing back then. REITs were kind of—so you’re saying you built one of the first ones?
We built one, yeah.
That was one of the first.
Yeah. Camden Property Trust became one of the largest multifamily companies. We also identified and worked with the 2 partners who founded it, and partnership is so critical. I can’t overstate that.
Yeah.
Finding the right partner in business and in life is enormous.
Right. Was it the fairness of Lou that drew you to him? When you look for a partner, what would you say to our viewers? I think a lot of them are on the younger side, probably under the age of 35 and reasonably successful, but at some point they probably want to start a business.
Right.
What would you say to them?
First of all, I would say it is the most important decision you can make. You can survive almost anything in business except having a bad partner. You really can’t survive that.
Lou and I both knew that, and there were other partners. We had a partner, Bob Pearre, as well. We all knew who was great, and we all knew that we didn’t have to look behind our backs. I had his back, and he had my back. We were only going to make decisions that were ethical, that we were going to be able to look at each other and look at ourselves in the mirror. I gave you 1 example that may have been overboard, right? There was literally—
Yeah.
There was nobody who was connected to that deal, but that’s definitely the tone at the top.
That’s amazing. I wasn’t expecting to get good life advice. I knew you were a smart guy, but this is actually pretty interesting stuff. Sometimes these conversations take turns. I want to get back to where you were. You bought this distressed bank out of Texas.
Yeah.
You turned it from basically nothing into a $20 billion bank.
Yeah.
And then you started to think to yourself, “What’s next?” Is that right?
That’s right.
Okay. What came next after that?
2. Launching Signature Bank
Just before we sold it, I was already thinking about Signature Bank. We didn’t have a name for it, but I thought New York was over-branched and under-banked.
This was at a time when Lou had done a lot, and he was going off in some other directions. He became chairman of Computer Associates, which at the time was a huge company—really huge. So I was doing this on my own to some degree.
I found 2 other partners, in this case Joe DePaolo and John Tamburlaine, and we founded Signature Bank. The idea was just to be a midsize bank in New York that would give good service to the middle market. The big banks were really good at serving huge corporations and mass-market retail, but they weren’t really so good at that middle-market piece. We thought we could compete there, and the hypothesis proved to be true.
What did people want from banks that they weren’t getting? What could you offer them that they were struggling to find?
First of all, a return phone call.
It was that bad?
It was that bad for the middle market. Middle-market people were being forced into the branch.
Right.
I used to say to people who were potential customers, “You’re not going to be able to get Jamie Dimon on the phone, but you can get me on the phone—and somebody who can make a decision.” We could work with middle-market people, and they would get a fast response. It might not be the response they liked. It might very well be no, but they would get it fast. Nobody would be strung along, and people loved it.
The bank never did an acquisition. It grew to $110 billion in assets, all organically.
Yeah.
Never an acquisition.
Okay, that’s what I was going to say. Give me an example of inorganic growth.
We never made an acquisition. It was all by adding people. Everybody who came in the door wanted to be there. They weren’t clients acquired from another bank. That’s what I mean by organic growth.
Right.
I’m extremely proud of that. So, by definition, we didn’t have any unhappy clients.
That’s pretty amazing. When did you start Signature? What year?
May 1, 2001.
May 1, 2001. Signature lasted for quite some time.
It should be here today.
But something crazy happened.
Yeah.
After the Fed decided to hike rates through the roof, potentially sinking your business. Can you take us through what happened at the end?
The Fed hiking rates had nothing to do with anything.
Okay.
Here’s what I would say. People often ask, “When did your Bitcoin moment happen? When did the penny drop?” You see my metaphors here? For me, it was 2013.
3. Signature Embraces Blockchain
I started to read about the confluence of cryptography and blockchain, because Bitcoin wouldn’t work without both of them really having gotten to a certain state. I became really captivated by blockchain, and I thought, “We have Fidelity, FIS, Fiserv, and Jack Henry. They’re using COBOL and C++ from the ’70s and ’80s. If we could use blockchain, we could have 24/7 payments of money.”
Mm-hmm.
In 2013, I was on CNBC at the closing bell, I think, and I was talking about how I was a blockchain maximalist. I wasn’t sure about Bitcoin, but I was sure about blockchain.
So we made the bank crypto-friendly.
Yeah.
That was really the issue. By 2019, I had created this thing called Signet.
Mm-hmm.
Signet was—and many of your listeners, anybody who was around then, will know Signet because it was the first 24/7 blockchain-enabled money transfer system, and it was enormously successful. By the end of 2022, it had around $1 trillion pass through it.
We actually used it as well. We were banking with Signature.
So you were 1 happy client.
We were a very happy client, mainly because nobody else would bank us.
So—
In crypto, it was very difficult back in the day. You had Silvergate and Signature, and basically everybody else said, “We can’t touch crypto,” which maybe we’ve learned in hindsight was actually part of the government’s policy, but—
I think it was the—
In 2022, we earned pretax almost $2 billion.
This is where I wanted to get into it—
Yeah.
because you said it had nothing to do with the Fed raising rates.
Nothing to do with the Fed raising rates.
But the mini-banking crisis did have something to do with a lot of banks having a mismatch between assets and liabilities, locking in rates too low.
Absolutely.
But you’re saying you didn’t.
We didn’t.
You specifically.
I mean—
Would you agree that the general crisis was part of the reason for the downfall?
First of all, you could use your favorite LLM.
Right.
You probably need Cursor. You're probably going to take a little bit of agent work, but you could find which companies had a mark-to-market loss. There were a lot of banks that had enormous mark-to-market negative net worths. If you look at the balance sheet of Signature, which was filed March 1, 2023—less than 2 weeks before—it was mark-to-market positive. One thing that was clear to me, and I think to others, was that rates were going to go up.
Right.
So we didn't go there. But there's a lot of slop. One thing I've really learned, and it's so profoundly disappointing, is how haphazard and careless most journalists are. They didn't do any work.
Really?
It was so easy. All you had to do was look at the filing, the financial statement filing. Was the company mark-to-market? What was it? Well, it was mark-to-market positive. So that's not an issue. Instead, they just report whatever—I don't know—somebody told them.
Right. Financial journalism has a lot of problems, I think, mainly because they actually don't understand finance.
Might be.
4. The Signature Bank Takeover
So let me give you another caveman finance example. The day before Signature, Silvergate was shut by the government because they didn't like crypto, on a Tuesday or something. Then, on Thursday—the day before—we were up in deposits for the quarter. We had issued a press release saying we had $34 billion in cash.
Mm-hmm.
On Friday, I was literally taking off to have a dental implant. It's my tattoo in a certain kind of way, in that I haven't had the dental implant put in place. It's staying there as a reminder.
Oh, so you never got back to it.
I never got the dental implant.
But I'm feeling it as you're saying it. Yeah. I never had it put in.
That's incredible.
I don't do tattoos, but that's my tattoo. We announced that we had $34 billion in cash and liquidity. On Friday, we had an $18 billion run after Silicon Valley Bank really did run out of money. You can do arithmetic. Even cavemen could probably do $34 billion minus $18 billion equals $16 billion. They might have pictures of bones, but they'd still get it.
Right, right. Sure.
Then, over the weekend, again, this was public, we raised $20 billion.
Right.
And astonishingly, the bank was taken. So you tell me what it was about. We had plenty of capital.
I'll give you a chance—
Plenty of capital.
—to address a rumor—
Yeah.
—that it was because you guys were banking the mafia. I don't know if you ever heard this. This is a real rumor that went around.
This is a real thing.
This is a real rumor that went around: Signature was shut down because you guys were banking the mafia.
I'm astounded. I didn't even hear that rumor. Nobody's been able to say that to my face, no.
Yeah, no, that rumor was being passed around. It's crazy, I think. What do you think of this guy, Nick Carter, who's written a lot about bank choke point 2.0?
Yeah.
Do you think—
I suggest people read Nick Carter.
Yeah.
He was one of the few people who wrote an article about Signature.
Right.
You can Google it or put it into your LLM and ask about it, but it said Signature—I can't remember the name exactly—but it was something like “Signature Bank Didn't Have to Die.”
What was it like on the day you got that news? How did you get the news in the first place that Signature was being taken?
That period was literally the most traumatic in my life. When I lost my parents, those were really, really, really, really bad days. Both deaths were sadly unexpected, but I knew I'd get better.
Yeah.
But when the government did what it did, there was a point where you don't know what to do. The government has this whole mechanism for hounding and destroying people. They're really good at it. That's the superpower of government.
And that's the whole reason why Satoshi came up with—
Superpower.
Satoshi came up with, uh—he wanted to, he thought he had answers. I was so crushed. I ended up having a left-knee replacement shortly after the nerve in my left eye started to deteriorate. Thank God, I was fine with it.
It's so dramatic.
I don't know if I'm oversharing, but it's all this stuff. It was really traumatic.
Who in the world, if you had put the question to me—it wasn't Kalshi in those days—and asked me to bet on the point that I'd be testifying before the House and the Senate—
I had to testify. I said, “By the way, the bank shouldn't have been taken,” which nobody followed up on either. Nor did any reporter. I would have given that zero odds. I literally probably would have made you an almost infinite bet the other way.
Right.
And then all this stuff happens, and it's just—I shudder, you know?
Do you know who made the decision to take the bank?
I have suspicions, but I'm not going on the record.
Okay.
I'm not going on there.
Fair enough. Fair enough.
Yes.
I thought I could have a fun one there. Does it rhyme with Loren? Is the last name something that rhymes with Loren?
I will lead you.
We'll let the listeners figure that out. He didn't say anything. I said it. I said it. Maybe we'll end on a happy note.
Yes.
So after all that, you're back on your feet now.
Absolutely.
You're absolutely back on your feet, and you're starting something new—
It's going to be so much better.
—which just so happens to be a bank.
Yes.
So tell us about that.
So let me tell you about it.
Yeah.
5. The Nonfractional Banking Revolution
I believe you learn from everything. If I could give one other piece of life advice, it's that you learn from everything. If you don't, you're making a mistake. Even things—I didn't think there was anything I could learn. I thought I was just going to have to get over this. But I learned: How did Choke Point 1.0 and 2.0 work? Fractional banking.
It works because—how does a healthy bank get taken over? It's because you need some government entity to say you're insured, that there's a lender of last resort. Every bank that everybody here deals with works this way: You put in $10, so do 4 other people. They lend out $40 of it, and everybody thinks they have the same $10. So if there's ever a day of stress, you need a lender of last resort. Silicon Valley Bank needed one; we didn't.
Right.
Since deposits are insured to $250,000, the government can just say, “We're withdrawing insurance.” They can shut a bank literally with no notice any day, and there's no recourse.
Totally.
What I wanted to do, and what I've done with my 3 co-founders—Jeffrey Wallace, Orel Bonnell, and Kyle O'Donnell—is start a bank that meets more of Satoshi's initial definition of how you can do a real bank. We take all the money that everybody deposits in the bank and put it in very short Treasuries—not repo, not anything else. We're better than a money-market fund because we have the exact receipt for the Treasury, so we can present it to the Treasury. There's no need for $250,000 because we have the direct government credit on all deposits.
Then we can do 24/7 payments anywhere, any place, any time, safely and securely—10x better in terms of beauty than Signet ever was. I really think this idea of nonfractional banking is a revolution whose time has come. I think we're going to do it. I really do. It's a lot of—
Even here at the conference, a lot of people are trying to integrate totally with TradFi, with the big mega-banks.
Right.
You know, JPMorgan is everywhere. I think what we're trying to do is actually much more revolutionary. We've actually stuck to Satoshi's vision, which is: when you move a dollar at N3XT, at our bank, you actually move a dollar.
Right.
You don't move a promise to pay. You don't move a promise that has a lot of contingencies behind it. You're actually moving that dollar because it's sitting on our balance sheet, never having left, never having been lent out. Just like Satoshi wanted to say, "I wanna move a whole thing of Bitcoin, not like a bank." He really hated the idea—whoever he was—
Right.
I have my theories about that, too.
You got your theories?
I've got my theories, too, but that's another—
Okay. We'll get into—
That's a totally different—
We'll get into that another time. We're going to have him back on to talk Satoshi.
But having said that—
Yeah.
He hated fractional banking. It's clear—
Right.
—from the white paper.
Right.
What we've done is removed fractional banking and brought dollars as close to Bitcoin as possible by making our core ledger a blockchain, by having everything be immutable, and by not needing a lender of last resort, so we—
Right.
—can't just be like, "Well, we don't like the tie you're wearing, or that you're not wearing a tie."
No, it's true. And remind everybody the name of the bank before we wrap up.
Yes.
N3XT—N-3-X-T.
Can I open an account yet?
Any business can. We're B2B. You can open an account. We've had a soft launch. We're now launched.
Very nice. Scott, thank you so much for coming on. This was a lot of fun. What a great conversation.