JustaTexan

Is Your Cash Safe at the Bank?

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I thought this was a very good read. Doesn't really apply to me as I don't have over 100k in the bank :lol: but still a good read.

As furious IndyMac (IMB - Cramer's Take - Stockpickr) customers waited on long lines to withdraw their funds on Tuesday -- four days after the government took over the insolvent bank -- clients of other banks have begun to worry about the fate of their cash as well.

Regulators seized IndyMac on Friday, after a run on the bank evaporated more than $1.3 billion in deposits and pushed the bank over the edge of insolvency. IndyMac had already been struggling under the pressure of liquidity issues and the tanking housing market. Some customers became irate when informed that only up to $100,000 in personal funds would be federally insured, and those waiting outside a branch in California's San Fernando Valley were threatened with arrest, the Associated Press reported.

continued at link

http://www.thestreet.com/story/10426628/1/is-your-cash-safe-at-the-bank.html

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Duh. I have no sympathy for deposit account holders who didn't read the disclosures. It is common knowledge that the FDIC limits claims to $100k. Anyone with that kind of money is well aware that anything above that limit is not insured.

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Duh. I have no sympathy for deposit account holders who didn't read the disclosures.
Ditto. But I am not surprised. People can be so lazy. I heard that there were roughly 10,000 IndyMac accounts that were underinsured. :confused:

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The FDIC does not have the funds to cover all that it is has insured. IndyMac was not even on its list of potential bank failures and it is one of the largest in the history of the country. The FDIC maintains a list of banks that are at risk of failure. It is estimated that IndyMac will eat about 10% of the funds to which the FDIC has access. This is only the beginning. A time will come when there will be no money to pay account holders in failed banks with cash. These people will be given treasury bonds that will have no active market. It could be years before these people have access to cash. At this point trusting that your money is safe in a bank is ill advised.

I'd keep a few months supply of cash at home and put the rest of it into gold. Physical gold, no third party holding accounts. The fewer financial entities you have between you and your assets the better protected you are. This is going to get ugly.

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.....

[The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! The Sky is Falling! ]

......

I'd keep a few months supply of cash at home and put the rest of it into gold. Physical gold, no third party holding accounts. The fewer financial entities you have between you and your assets the better protected you are. This is going to get ugly.

Buy gold!! (if you want to buy at an historic high)... If you aren't on the commodities bus by now, then you already missed it!

The FDIC/FSLIC has already proven once they would step in and pay in the event of many failures... this was 20 years ago when 700 institutions failed... This cycle won't be nearly as bad, and the FDIC is still here.

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IndyMac was not even on its list of potential bank failures

And how, pray tell, would you know that? That list is kept confidential as sharing it would cause a run on the banks.

No...IndyMac had a run because a dumb-@$$ Senator made some unfounded and unprovable comments about IndyMac at a financial get together and everyone panicked. Frankly, that Senator should be censured for such stupidity.

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This info came out in the news from a moron being payed with tax dollars who couldn't manage to keep his mouth shut when talking to a reporter (after the fact, so it had nothing to do with the run on the bank). And now WaMu is getting ready to fall off a cliff. IndyMac, NorthernRock and Bear Stearns all inform us of the power of gossip and rumors to devastate. This gossip mongering is part of the human condition, seemingly. Of course, it is sometimes done by design for profit as is being investigated in the Bear Stearns mess, and it's not going to stop. The money guys are scared and greedy. Now they have moved on to WaMu. If they don't manage to pull her back from the cliff it's going to get ugly before even the most alarmed among us expected. WaMu is huge. We know there are at least 90 banks on the list; this they have admitted. IndyMac was not one of them - a complete surprise. We know they are pulling pros out of retirement to handle all the work of examining these banks that are teetering on the edge.

If you think the commodity prices have peaked you're listening to too much financial TV and/or reading too many press-releasing newspapers pretending to be staffed with journalists. Almost (with very few exceptions) the entirety of the financial press in this country is abysmal. I'll do it my way, and you do it yours. I'm buying gold. I'm not on the commodities bus; I'm on the gold bus (with a bit of silver tossed into the mix), and what a sweet ride it has been. My long term strategy isn't even close to being played out. I'm not going to write the number magnet that I believe is pulling gold, but we're not close to it. I'm not saying it's going to happen tomorrow. I'm in no rush.

Gold is moving toward a price such that the price of gold in USD times the number of ounces of gold held by the US Treasury will be equal to the foreign liabilities. This will balance the external balance sheet of the USA. Of course, the number of ounces held by Treasury is a big mystery as they refuse to allow an audit, so we have to use the number they tell us is the truth. Even using that number, gold is going to be many times the price it is today. Many times.

Just released data by the US Department of the Treasury puts the Federal debt held by foreign investors at $2,438,600,000,000. Work that number into the equation and gold is looking cheap.

The FDIC right now, after IndyMac, has $48 billion in available funds insuring over $13 trillion in deposits. If this is comforting to anyone, all logic is lost. Do the math. If one more big boy collapses and a handful of regional banks collapse, FDIC assets are wiped out.

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The feds will step in and back FDIC no matter what. As long as you are under the limit, then you are good to go. A failure by FDIC to insure would spell the mother of all bank runs and pretty much cause the collapse of the US (our dollar would immediately lose most of its value to due to the massive leverage). Thus, even if the feds had to raise tax rates immediately to do so, there is no possible way FDIC would not immediately cover all losses. The alternative is just to dire.

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Failed Bank Information - First National Bank of Nevada, Reno, NV

July 25, 2008

This Bank was closed by the Office of the Comptroller of the Currency (OCC). Subsequently, the Federal Deposit Insurance Corporation (FDIC) was named Receiver. All deposits have been assumed by Mutual of Omaha Bank, Omaha, NE. Failed Bank Information - First National Bank of Nevada, Reno, NV

Failed Bank Information - First Heritage Bank, N.A., Newport Beach, CA

http://www.fdic.gov/index.html

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Yes, when the FDIC exhausts its available money, the insured accounts will still be covered, but those depositors will not be given checks; they will be given Treasury Bonds that will have no active market. Those Treasury Bonds are not going to fill the fridge or put fuel in the car until a market is reestablished for them, which could be many years.

People in this country are too habituated to everything just having a way of working out in a way that is bearable. There is mass ignorance of the enormity of what is happening.

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Oh give it a break.

Take a look at this video clip from ABC News: http://abcnews.go.com/Video/playerIndex?id=5392456

The fact is Dave Ramsey says this "sky is falling" stuff about banks is baloney. He's an expert on this stuff. He's also not one to mince words about it. If he is saying the bank fallout is being blown out of proportion, I tend to agree. After all, he's gone broke once himself and is now a millionaire again after learning how finance, real estate, and insurance works.

If he's not panicking (and he would since he is so paranoid abut going bankrupt again that he has an emergency fund for his emergency fund) then people should just take a chill-pill and just be smart about their money. In other words, don't buy a Porche if it would leave you with no cushion in your budget...don't eat out if you're worried about being able to afford the price of milk.

And don't be worried about your bank "failing" unless you have a huge money pile in one place (which is stupid anyways).

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ABC television? You're kidding, right? Spin and perception management will only delay the inevitable. Dave Ramsey doesn't have the credentials to speak with any authority on global economic issues. You'll never see nor hear the true economic heavyweights on ABC or any other corporate network because what these people have to say ABC would rather you not hear.

We got to see yet another bank fail today - all six branches of First Priority Bank in Florida. The FDIC is very busy these days.

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Dave Ramsey doesn't have the credentials to speak with any authority on global economic issues.

I've said this to others, and most people agree: I don't care what your broke finance professor, an underpaid economist, or your relative that can't rub two nickles together have to say about finance. I want to hear what people who have money have to say. They are the ones who have succeeded and continue to succeed.

Ramsey is a millionaire by hard work and knowledge. He's been through the hard times and has recovered from it. I would classify that as being well credentialed...moreso than the fear-mongers who've never actually had to go through it. Incidentially he does hold double degrees in Finance and Real Estate and holds the record as the youngest person ever admitted to the Graduate Realtors Institute.

Since it hasn't been said. EVERY BANK THAT SO-FAR HAS BEEN TAKEN OVER BY THE FDIC THIS TIME AROUND WAS INVOLVED IN SOME SORT OF ACCOUNTING FRAUD. That's not a facet of the economic conditions, it's a criminal act by a person or persons involved.

In the 1980s the S&L Crisis saw over 800 banks fail over a 12 month period (due to a shift in government policy by the Reagan Administration). The US economy reeled but recovered. Our government didn't go broke. Some people lost their fortunes but the vast majority did not. The dollar survived.

How many banks so far have been seized by the FDIC over the past 6 months? Less than 12.

So get a grip. The economic world is not ending and you're not helping by trying to scare people into a run on the banks.

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Oh give it a break.

Take a look at this video clip from ABC News: http://abcnews.go.com/Video/playerIndex?id=5392456

The fact is Dave Ramsey says this "sky is falling" stuff about banks is baloney. He's an expert on this stuff. He's also not one to mince words about it. If he is saying the bank fallout is being blown out of proportion, I tend to agree.

I'm sorry, but, HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA 8-)

Anyone who listens to the corporate controlled media and "tends to agree" regarding issues such as the downfall of America on ABC News deserves to be laughed at.

Anyone intelligent who understands what is happening has their money in offshore bank accounts in foreign currencies.

Welcome to the Death of the Dollar.

Good day.

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Clearly you are not a student of history (or economics). Try reading some. This isn't the first, nor will it be the last time that the US economy goes through a period of contraction.

How old are you anyways? I'm guessing too young to recall the currency crunch of the early 1980s.

So lets sum that event up: Gasoline prices doubling. Credit barely available. Interest rates on home loans in the upper teens. Over 800 banks failing. Fraud in the financial markets in (for that day) record amounts. Sound familiar? The only thing missing today that existed then is gasoline rationing and high mortgage rates.

Well guess what? You're still here. The USA is still here. Your paycheck still comes in US dollars.

So who should be laughing at who? I personally think all this fear-mongering is one of the primary reasons that this financial contraction is taking too long to come out of.

Oh and before you try to correct me on my terminology. A "recession" means the Gross Domestic Product has to go into the negatives. That still has not happened. The GDP is still running positive every quarter. Yes, it has gone down from 7% in 2006 to 4.9% as of second quarter 2008, but it is still running positive...and above the current inflation rate of about 4%. That means our economy is growing not receding. Just not at the dot-com rate younger people became so spoiled over.

I'm sorry, but, HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA 8-)

Anyone who listens to the corporate controlled media and "tends to agree" regarding issues such as the downfall of America on ABC News deserves to be laughed at.

Anyone intelligent who understands what is happening has their money in offshore bank accounts in foreign currencies.

Welcome to the Death of the Dollar.

Good day.

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This is not the S&L crisis. That is but a blip on the radar compared to what is happening now. Today's economic world is vastly different. The current crisis is worldwide, and we ain't seen nothing yet. Just wait until the balance sheets are marked to market instead of marked to model. The show has just begun, folks. It's a protect yourself or perish (financially) situation. Thousands of S&Ls are no comparison to the financial titans that are scrambling to avoid death today.

I'm not saying Ramsey hasn't helped people, but if you look to him for advice in situations such as these, well, good luck to you. I have no doubt that he offers useful advice about how to devise and manage an economic plan on a household level, but this is an entirely different creature we are talking about in the current worldwide situation.

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FYI- the GDP has been carefully managed as to avoid recession. They use a deflator figure that quickly turns negative growth into positive. And by the time all of the hedonic and seasonal adjustments are made, the validity of this figure is borderline absurd.

Nevertheless, some banks will fail. But the world economy depends on the dollar (or at least the lack of failure of the dollar), so the world banks will defend the dollar.

We will survive this- it just depends on how much of it is shouldered by US taxpayers. I would suggest it should be $0. Let destruction of this shell economy take place. Helicopter Ben obviously has a different point of view.

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The world has never in the past been as economically linked as it is today. The current crises is worldwide and to choose to ignore that fact is wishful thinking or ignorance. To even suggest that what is happening now is similar to the S&L debacle doesn't really merit a response.

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This info came out in the news from a moron being payed with tax dollars who couldn't manage to keep his mouth shut when talking to a reporter (after the fact, so it had nothing to do with the run on the bank).

Schumer's no moron. He undoubtedly got well taken care of for making those comments, in one way or another.

And now WaMu is getting ready to fall off a cliff. IndyMac, NorthernRock and Bear Stearns all inform us of the power of gossip and rumors to devastate.

Then why hasn't the plug been pulled on Lehman?

Connections count for something...

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Lehman won't survive. They'll be another orchestrated take under. They can't remain independent with the looming deficit on their balance sheets.

WaMu- they most likely won't survive unless they significantly increase capital by diluting shareholders driving the price down even further. Among all the other risky behaviors banks engaged in, WaMu was the king of the negative amortization loan. All of the accruing interest and the interest on the interest was booked as profit in previous quarters despite the fact that it is virtually 100% uncollectible. When they "adjust" their balance sheet, things will get ugly over there. A CFO resignation should be forthcoming and then sh*t will hit the fan.

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I thought WaMu's "death spiral financing" deal (when they raised the last round of capital) virtually precluded raising any more equity? Or are you suggesting that the death spiral financiers will not insist on the precise terms that WaMu has agreed to, figuring a diluted position in a live bank is better than an undiluted one in a dead one?

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TPG now owns a large chunk of WaMu due to capital injection #1. If WaMu can't sustain losses for the next 18 months, which I don't think they can, TPG is due a major refund if they raise capital by issuing shares below $8.75. This is just the starting point for negotiation. What will likely happen is they'll inject more capital and the refund will be foregone in lieu of a forced management change. Essentially TPG will receive the control premium instead of a non-existent cash refund.

What a mess for shareholders. And to answer your question, yes. Allowing WaMu to survive and forego cash is better than sending them a large uncollectible bill.

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