[Ludi]

I'm not seeing where it says what qualifies as a "large deposit" which would be frozen....



Anyone know?

[Tyler_JC]

What qualifies as a large deposit?

I'm tempted to say "screw this" and move whatever cash I have out of the country.

I wonder if I can set up an account through that friend of ours in Zurich...

[Jack]

Probably anything above the $100,000 limit.

Keep your deposits small, well diversified, and low key. Move things around, but do it quietly. Gray man kinda deal.

Learn about smurfing. Don't do it, of course. That would be wrong. Learn about it so you can avoid doing it.

[Twilight]

From a reading of the article, I assume a "large deposit" is one which exceeds FDIC coverage.

This is only my interpretation based on the barest of facts mentioned in the article, but essentially uninsured depositors may have the ability to participate in a bank run formally removed.

One finding that came out of the Treasury Select Committee hearings into the Northern Rock collapse last autumn was that depositors whose accounts exceeded FSCS insurance thresholds had a rational reason to pull out their money and in doing so undermine the bank - which they could do as that group under the rules of the time accounted for a very large proportion of its deposit base. The Bank of England shared in this assessment. I saw a repeat of the live broadcast on TV. There was a clear admission that the insurance limits acted as an incentive to participate once rumours of the bank's condition spread and the run began.

Having learned this lesson, it was logical for the authorities to neutralise this incentive, and so insurance thresholds and levels were quickly reviewed and improved.

Perhaps in the US this was deemed insufficient.

The utility of the power as described would be to prevent this rational self-interest from being exercised in a crisis to its logical effect, thereby halting an exodus of funds that could by itself sink a bank. This is only my interpretation, but in essence the message seems to be "You must know the deposit insurance limits, and if you exceed them, your deposit can be treated as a point of vulnerability in a crisis and neutralised for the duration." If the crisis passes, all ends well and the money would be unfrozen, perhaps in stages. If it does not end well, the depositor would be held at fault for exceeding the limits. Either way, during a run, the large depositor's interests might not be allowed to come into conflict with those of the bank.

[wisconsin_cur]

What I wonder about is my employer's bank and how exactly that works. They have to have an account with over 100 K because if not then paychecks would bounce. I am not in a position to know but I wonder, are all of their accounts with the same bank that cuts my paycheck? What happens if that bank(s) go under?

How long until I get paid?

I have to confess, however, that I am already moving into inflation mode.

When I get some money I run out and buy something with it or pay off a bill with it.

Today I filled up the LP tank. this next winter will be the test for a new heating regime... but it is quite possible that this filled tank could last 2-3 winters (we heat primarily with wood) if not longer.

I will soon be cash poor but asset rich (in assets that I use on a daily basis).

[Tyler_JC]

They should create another insurance program for deposits larger than $100,000 that is paid for by an extra fee on large accounts.

It wouldn't take much, maybe a small percentage of the interest earned on the account, and it would help protect the banking system from a run.

The extra insurance should be optional like life insurance but odds are it will end up mandatory.

[Cashmere]

Folks, the Constitution was strongest on the day it was ratified. It's been getting weaker since then.

Just like that, your rights and liberty have been taken slowly.

It's better that way.

Everybody remembers the ferocious storm that changes the landscape, but few will even notice the steady rain that wears it away, bit by bit.


This rule is simply the precursor to something else. Set the tone. Get you used to it. Get the next gen used to it.

It's always the same way.

Like, for example, the Federal Government's taxation of your income.

Just a bit, at first. You know. 1% of salary of the top 10% of wage earners. Then it expands. Then it expands.

In the late 70s, the marginal tax rate was 95%. 95%. Even Marx was rolling over in the grave thinking, "boy, not <i>that's</i> a f--- job."

This is not about freezing this account or that account or this limit or that limit.

This is about stopping bank runs, which are now expected, by freezing bank accounts.

It's that simple.

What number will be "large"?

It's all relative people.

When they need to freeze YOUR account to stop the run, then frozen your account will be, be it 100 large or 5 dollars and cents 23.

[pedalling_faster]

$this->bbcode_second_pass_quote('Cashmere', 'I')t's called - tell the big depositors to screw off if they smell trouble and they want their money out.

[Twilight]

In case it gets updated out, the relevant passages are as follows:

$this->bbcode_second_pass_quote('Bloomberg', 'J')uly 18 (Bloomberg) -- The Federal Deposit Insurance Corp. set a rule for banks to improve its ability to determine whether a customer's deposits are insured and speed up payouts in a bank failure.

The FDIC took over IndyMac Bancorp Inc., with $19 billion of deposits, July 11 after the bank failed to raise cash amid the worst housing crisis since the Great Depression. The collapse of the Pasadena, California-based bank threatens to spur withdrawals from banks ranging from First BanCorp in Puerto Rico to Los Angeles-based Nara Bancorp Inc. as customers trim accounts to below the $100,000 limit on deposit insurance, according to Sandler O'Neill & Partners LP.

Banks have 18 months to comply with the rules that go into effect on Aug. 18.

The policy covers checking, savings and money market accounts as well as certificates of deposit.

The new FDIC rules will require banks to standardize the information they provide on deposit accounts and to establish systems to automatically place holds on accounts with large deposits, the Wall Street Journal reported.

[vision-master]

keep only enough cash in the bank to pay your bills.

[Twilight]

$this->bbcode_second_pass_quote('pedalling_faster', 'a')s a small depositor, i like this solution.

i have a feeling that a run on one bank's deposits will inspire runs on other banks.

[Ferretlover]

$this->bbcode_second_pass_quote('Tyler_JC', 'W')hat qualifies as a large deposit? I'm tempted to say "screw this" and move whatever cash I have out of the country. I wonder if I can set up an account through that friend of ours in Zurich...

[kpeavey]

So if I need to withdraw a large amount of money to get my mother an operation, but the bank needs the money to stay open, the bank gets priority?

If I need cash to bail my brother out of jail, but the bank needs the money to pay the dumpster service bill, my brother is out of luck?

I need money to pay the mortgage or another bank will take my house, but the bank has to hold on to my money just in case someone else wants to make a withdrawal?

SCREW THAT!

The size of my checking account will be sufficient to cash checks and pay a few bills. I'll secure the cash elsewhere. Lost interest is negligible.

[Twilight]

If you earned the money legally and paid correct taxes on it, I do not see the problem with sending it abroad.

Lost interest holding physical cash is indeed negligible when you would otherwise earn 2%, the markets offer no alternative and price inflation is running amok. Luckily that is not a choice we have to face in the UK right now, where we have the opportunity to earn as much as 10%, before tax anyway.

[vetusfirma]

I have another plan. Using 3 accounts in 1 bank and 2 S&L's I am prepared to wire the balances to kitco, ampex and bullion direct the moment I get 'scared'. All I lose is the wire fee if I misjudge the moment. I figure all 3 won't go at the same time anyway.

Also, for twilight; when you say 'While I accept that people exceeding deposit insurance are stupid'..... it just tells me you have never been in business. Hi 6 and 7 figure balances are not that unusual for operating and payroll accounts. And that's for a small cap, no telling what a mid or large cap uses. Just think first.

[seahorse2]

This is about as stupid as it gets. I'm sure there are many sovereign wealth funds, countries, and huge corporations and institutions that have millions parked in various accounts. For example, imagine the payroll accounts for companies like GM? At any rate, this will send them offshore with Tyler, and rightfully so. Stupid shit like this could potentially kill American banking and actually cause the very run they are trying to prevent.

[Twilight]

$this->bbcode_second_pass_quote('vetusfirma', 'A')lso, for twilight; when you say 'While I accept that people exceeding deposit insurance are stupid'..... it just tells me you have never been in business. Hi 6 and 7 figure balances are not that unusual for operating and payroll accounts. And that's for a small cap, no telling what a mid or large cap uses.

[aahala2]

$this->bbcode_second_pass_quote('vetusfirma', 'I') have another plan. Using 3 accounts in 1 bank and 2 S&L's I am prepared to wire the balances to kitco, ampex and bullion direct the moment I get 'scared'. All I lose is the wire fee if I misjudge the moment. I figure all 3 won't go at the same time anyway.

[smallpoxgirl]

This rule just requires banks to have systems in place to be implemented "in the event of the institution's failure". Obviously if the bank fails, they need to be able to place a hold on large accounts until they can sort out whether they exceed the insurance limits. The rule only applys to large banks, so if there's anything to be alarmed about in this notice, it's the fact that FDIC is evidently concerned that more large banks will fail.

The actual rule can be found here:
http://edocket.access.gpo.gov/2008/pdf/E8-15492.pdf

[shortonoil]

smallpoxgirl said:
$this->bbcode_second_pass_quote('', '
')it's the fact that FDIC is evidently concerned that more large banks will fail.