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Originally posted by Dave Rabbit
Anyway, I was telling him that rather than taking her $125,000.00 and putting $100K in one bank and the 25K in another bank so it would all be insured, I figured if the world ever got to a point where my bank (a MAJOR bank) went under, we would be dodging missiles from Iran and it really wouldn't matter much anyway.
Originally posted by ClockworkJon:
Not to piss in anyone's pool, but FDIC's reserve goal is 1.25% of all US Bank deposits. Their total reserve is about $40 billion. The bank I work for has about 35 times the assets of FDIC, and its not the largest in the country. FDIC couldn't cover the top 25 or so banks if they tried. Also, they clearly state in their literature that they can take up to 99 years to reimburse. If you can invest wisely in a disciplined, long-term focused manner and beat an FDIC account, do it. One should always have some cash on hand for emergencies, but it doesn't make for a very good retirement. At this point you're not even keeping up with the price of milk, to say nothing of gas and medical costs. The Enron people got screwed because of Enron, not the market as a whole. Besides, anyone who puts 100% of their 401k into one of anything (like all Enron stock) deserves what they get, or what they lose, as it were. Just my $0.02 What do you expect, I'm a financial advisor!
Originally posted by Ken B.
Well folks, hate to break the really bad news to you. But if banks fail the FDIC has up to 99 years to pay back your money that is FDIC insured...
With all these new online banks which are pretty much just virtual branches of a lot of regional banks, I thought it would be a good idea to look more into this whole FDIC insurance thing we put so much trust into. First some quick basics, taken from the FDIC website:
What Does the FDIC Insure?
The Federal Deposit Insurance Corporation (FDIC) is a government corporation that insures all deposits at insured banks, including checking and savings accounts, money market deposit accounts, and certificates of deposit (CDs), up to the insurance limit. Use this form to find out if your bank is insured.
How Much Does It Cover?
The basic insurance amount is $100,000 per depositor per insured bank. Certain retirement accounts, such as Individual Retirement Accounts, are insured up to $250,000 per depositor per insured bank.
Way To Increase Your Coverage
Since accounts at different banks are insured separately, the easiest way to increase your coverage is to simply keep less than $100,000 at any one bank. You could have $100,000 each at 500 different banks, and be insured for $50 million in total.
You may also qualify for more than $100,000 in coverage at one insured bank if you own deposit accounts in different ownership categories. For example, here is a way that a husband and wife could qualify for $600,000 in total insurance all at one bank:
What Happens If My Bank Really Fails?
First off, I would note that the FDIC does not notify people that their bank is about to fail or has failed. The only way to you find out is when your debit card gets denied or you walk up to your bank and it has a new name. Here is a list of banks that have failed since October 2000, which includes a summary how it was handled.
The Finance Buff has a good post about what happens when your bank goes out of business. he example given is Metropolitan Savings Bank in Pittsburgh, which the FDIC took over just three months ago.
Here’s the timeline: The FDIC announced the bank’s takeover on Thursday. By Monday the deposits have been taken over by another bank, the branches were re-opened, and the insured people have access to their money again.
But, out of the $12 million in deposits in the bank, there were 30 account holders with total assets of $1.2 million not insured by the FDIC. Those people are now creditors to the receivership of the failed bank, and must wait as the FDIC liquidates the bank’s remaining assets. Waiting on the light fixtures to be sold until you can get any of your money back? Not good.
The takeaways here are
1. Banks still fail, and without warning.
2. If your money is insured, it is unlikely any failure will interrupt access to your funds for long. Either another bank will take over (they all want more deposits), or the FDIC will pay out from their reserves.
3. Never exceed FDIC insurance limits, because you may never see your uninsured money again.
Oh, it's true enough that they can and do create money out of thin air, or thin electrons. What is also interesting is that what they call 'marginal banking' is their version of counterfeiting with a pen, instead of a printing press. After the Great Depression, a law was passed that banks had to have 10% of their deposits on hand. The banks quickly interpreted that to mean they could loan out 9x their actual deposits. So you deposit $100. How much of that is loaned out? NONE! They only loan out up to $900 because of your $100 collecting 2 or 3% interest. When it is payed back, they have 'made', literally counterfeited, 1200%. And they throw you 3%. Personally, I think any idiot who would go bankrupt doing such a profitable scam, should be shot, even if they are from the Bank of Italy, or a Well Fargo Robber bank. So who is robbing Americans more, those bankers, or a government that spends 75% of our GNP? And half of the Federal budget is 'Black Budget', unaccounted for. Sure a good thing we can all trust this government.
Originally posted by Cyberbian
I am sorry but I don't quite understand the line of reasoning.
Perhaps you can help me out. I thought that all the government had to do is print up some more worthless money and start handing out bales of it.
OK that is a metaphore. We all understand that they simply release an electron flow.
So, in the scenario of a bank crisis, what is to keep them from pulling the dollars out of thin air? Or am I wrong about this being a viable response?
This is a brilliant discovery none-the-less!
Sheila Bair, chairman of the Federal Deposit Insurance Corp., weighed into the debate over what to do about the nation's foreclosure problem, telling reporters that the Treasury Department should make up to $50 billion available for a "homeownership preservation" program.
The largest number of deposit accounts in a failed institution for which the FDIC has had to make an insurance determination was about 175,000 for NetBank, FSB, Alpharetta, Georgia, on September 28, 2007. Today, some of the larger banks have more than 50 million deposit accounts.