FDIC backed vs. Credit Union - Reliability of Savings:
i want to open up a savings account with a bank that has a better chance of surviving turbulent economic times.
i talked to a local credit union, i had to be impressed, their safe deposit boxes are half the price of a bank. kind of customer-oriented.
the FDIC has $50 Billion in reserves which i don't think is enough. i guess BofA and a few other banks just cobbled together a $100 Billion fund to cover their mortgage-backed-security losses.
if we get to a situation where it's "Grapes of Wrath with iPod's", which it may already be for a lot of people, i'd still like to be able to count on a stable savings account.
FDIC & FCUA both have accounts with $100K guaranteed by the "bull faith and credit of the
US government" (that was supposed to say "full" but i'll go with the typo).
is there a difference between FDIC & credit union accounts - in a scenario where a major bank fails, do FDIC or credit union "suck hind tit" when it comes to federal deposit insurance ? does one or the other get preferential treatment, in the event of a major bank failure ?
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THE FDIC Thread (merged)
THE FDIC Thread (merged)
by pedalling_faster » Mon 22 Oct 2007, 17:50:58
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Re: FDIC backed vs. Credit Union - Reliability of Savings
by mattduke » Mon 22 Oct 2007, 18:12:11
You may wish to consider treasury money market accounts versus bank accounts. Remember, banks create multiple titles (deposits) to the same property (reserves). A treasury money market does not do this, however it does expose you to risk of an "abrupt" decline in the price of US treasuries. In any case, the question you should be asking yourself is, "why do I wish to own dollars and promises to pay dollars when the entire world is nervously anticipating the dollar to crash?"
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Re: FDIC backed vs. Credit Union - Reliability of Savings
by pedalling_faster » Mon 22 Oct 2007, 18:24:23
$this->bbcode_second_pass_quote('mattduke', 'I')n any case, the question you should be asking yourself is, "why do I wish to own dollars and promises to pay dollars when the entire world is nervously anticipating the dollar to crash?"
i agree.
i think it's a good idea to go to Canada and set up
some bank accounts denominated in a more stable
currency.
as far as owning gold, i got one Eagle on my desk.
normally if you have an investment and it rises in
value, you have this "woo-hoo" feeling. that's not
the way i feel about gold's rise, since it's associated
with the decline in the value of the dollar.
owning gold is kind of an anti-depressant. that way
you don't feel so bad when the dollar tanks.
but in the mean-time ... i still need to tend to
dollars in American bank accounts.
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Fed. Deposit Insurance Corp.- 1/2 in 6 months, 1/2 in7years?
by pedalling_faster » Mon 26 Nov 2007, 14:59:57
i just spoke with an account person at Wachovia, to ask them to describe what happens in the event of a bank failure.
he rattled off some bank numbers, "X Bank just lost $Y on mortgage-backed securities, and still had a $Z profit." i acknowledged that i was talking about preparing for a difficult situation, that perhaps at Northern Rock (or whichever bank(s) have failed recently), that a failure seemed unthinkable also.
basically i said, "if this bank fails, what is the Procedure ?" for recovering funds, noting that i had a minimal amount on deposit, and was thinking about closing it, or adding some more. Bottom Line, according to Wachovia Bank Person - if a bank fails in the US, the FDIC has 6 months to pay the first $50K of deposits, and another 6 1/2 years (or 7 years) to pay off the next $50K.
while i'm looking at FDIC fine print, i'm wondering if anybody else here knows straight answers about recovering deposits from a failed US bank. it sounds like there's some wisdom in keeping 6 months worth of expenses as "cash on hand", and limiting accounts with any one bank to $50K. God knows what $50K US will be worth in 7 years in the event of a series of bank failures in the US. "approximately = 0".
he rattled off some bank numbers, "X Bank just lost $Y on mortgage-backed securities, and still had a $Z profit." i acknowledged that i was talking about preparing for a difficult situation, that perhaps at Northern Rock (or whichever bank(s) have failed recently), that a failure seemed unthinkable also.
basically i said, "if this bank fails, what is the Procedure ?" for recovering funds, noting that i had a minimal amount on deposit, and was thinking about closing it, or adding some more. Bottom Line, according to Wachovia Bank Person - if a bank fails in the US, the FDIC has 6 months to pay the first $50K of deposits, and another 6 1/2 years (or 7 years) to pay off the next $50K.
while i'm looking at FDIC fine print, i'm wondering if anybody else here knows straight answers about recovering deposits from a failed US bank. it sounds like there's some wisdom in keeping 6 months worth of expenses as "cash on hand", and limiting accounts with any one bank to $50K. God knows what $50K US will be worth in 7 years in the event of a series of bank failures in the US. "approximately = 0".
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FDIC Hires New Staff in Anticipation of Bank Failures
by mmasters » Fri 29 Feb 2008, 20:24:15
WASHINGTON -- The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen.
The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.
FDIC spokesman Andrew Gray said the agency was looking to bulk up "for preparedness purposes." The division now has 223 employees, mostly based in Dallas.
The agency, which insures accounts at more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.
In public, policy makers are debating what role the government should play in trying to stabilize the housing market and minimize foreclosures. Meanwhile, regulators have worked discreetly behind the scenes to closely monitor the growing number of troubled banks and thrifts considered at risk.
"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.
In job postings on its Web site, the FDIC said it is looking for people with "skill in performing duties associated with a financial-institution closing, such as receivership management, resolutions and/or asset disposition; knowledge of the resolutions process as it relates to complex financial institutions." Such positions would require "very frequent overnight travel," the posting said, and would pay up to $180,770.
"The notion of bringing back some people who have been through it before is very smart," said William Isaac, who was FDIC chairman from 1981 until 1985. All told, the FDIC has roughly 4,600 employees, far fewer than the about 15,000 it had as recently as 1992.
On Sunday the FDIC ran a newspaper ad seeking companies that could service commercial loans, mortgages and student loans in the event of a bank failure. It didn't say how much a company could earn in this area.
more at:
http://www.gata.org/node/6031
The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.
FDIC spokesman Andrew Gray said the agency was looking to bulk up "for preparedness purposes." The division now has 223 employees, mostly based in Dallas.
The agency, which insures accounts at more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.
In public, policy makers are debating what role the government should play in trying to stabilize the housing market and minimize foreclosures. Meanwhile, regulators have worked discreetly behind the scenes to closely monitor the growing number of troubled banks and thrifts considered at risk.
"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.
In job postings on its Web site, the FDIC said it is looking for people with "skill in performing duties associated with a financial-institution closing, such as receivership management, resolutions and/or asset disposition; knowledge of the resolutions process as it relates to complex financial institutions." Such positions would require "very frequent overnight travel," the posting said, and would pay up to $180,770.
"The notion of bringing back some people who have been through it before is very smart," said William Isaac, who was FDIC chairman from 1981 until 1985. All told, the FDIC has roughly 4,600 employees, far fewer than the about 15,000 it had as recently as 1992.
On Sunday the FDIC ran a newspaper ad seeking companies that could service commercial loans, mortgages and student loans in the event of a bank failure. It didn't say how much a company could earn in this area.
more at:
http://www.gata.org/node/6031
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Let's talk about FDIC
by smallpoxgirl » Wed 26 Mar 2008, 21:37:03
We all know that the FDIC is supposed to protect our savings if there is an economic crisis and our bank fails. The money FDIC uses to do this is kept in something called the Bank Insurance Fund(BIF). The BIF reserves are measured in terms of a reserve ratio, i.e. the ratio of BIF assets to insured deposits. By statute, FDIC is required to keep the BIF reserve ratio at 1.26%. I recently bumped into a newspaper article that mentioned that in 1991, the BIF had a negative reserve ratio, i.e. the BIF became insolvent. I thought that was pretty amazing. Here's a graph of the BIF reserve ratio:
So in fact FDIC was made temporarily insolvent by bank failures in the 80's and early 90's. There's a paper here by an economist at FDIC using a computer model to estimate the chances of it happening again. link The long and short of it is that if you assume that bank failure rates will be about what they've been, the chances are about 3% of BIF becoming insolvent again. If you assume the losses in a future crisis will be about twice what they were in the 80's, there's a 50% chance of the BIF becoming insolvent.
What he also breezes by, without much mention is that in a financial crisis the assets in the BIF could loose value. That scenario is not accounted for in the 50% figure. Looks like the BIF is invested almost exclusively in Treasury Securities:link. I would assume that would make for good liquidity and low risk, though it would be pretty vulnerable to inflation, since only $6bn of the $35bn pool is in TIPS, right?
So in fact FDIC was made temporarily insolvent by bank failures in the 80's and early 90's. There's a paper here by an economist at FDIC using a computer model to estimate the chances of it happening again. link The long and short of it is that if you assume that bank failure rates will be about what they've been, the chances are about 3% of BIF becoming insolvent again. If you assume the losses in a future crisis will be about twice what they were in the 80's, there's a 50% chance of the BIF becoming insolvent.
What he also breezes by, without much mention is that in a financial crisis the assets in the BIF could loose value. That scenario is not accounted for in the 50% figure. Looks like the BIF is invested almost exclusively in Treasury Securities:link. I would assume that would make for good liquidity and low risk, though it would be pretty vulnerable to inflation, since only $6bn of the $35bn pool is in TIPS, right?
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Re: Let's talk about FDIC
by DantesPeak » Wed 26 Mar 2008, 22:29:58
Although the FDIC is kind of a mandatory insurance for the banks, in the event of insolvency the government would pay out the losses or loan money to it.
Ultimately much of any deficit that results would be paid for by the American taxapayer.
Ultimately much of any deficit that results would be paid for by the American taxapayer.
Last edited by DantesPeak on Wed 26 Mar 2008, 22:45:56, edited 1 time in total.
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Re: Let's talk about FDIC
by Heineken » Wed 26 Mar 2008, 22:41:45
Since about the time Bush borrowed more money than all previous presidents combined, I've considered the notion that the FDIC could actually bail out all US bank-account holders a fiction.
Is that BIF money really there? In what form? Is it real money or just data on a card?
How can a government that is already $10 trillion in debt make good on the massive claims a failure of the bank system would generate?
The taxpayers would have to pay for it, Dante? How could they? With the same money they were reimbursed after their banks went bust?
We are facing hyperinflation, my friends. Falling rates, a shrinking dollar, and vanishing confidence in the dollar will have to be met by ever-thicker blizzards of dollars.
The FDIC might be able to pay the claims, but in worthless dollars.
Is that BIF money really there? In what form? Is it real money or just data on a card?
How can a government that is already $10 trillion in debt make good on the massive claims a failure of the bank system would generate?
The taxpayers would have to pay for it, Dante? How could they? With the same money they were reimbursed after their banks went bust?
We are facing hyperinflation, my friends. Falling rates, a shrinking dollar, and vanishing confidence in the dollar will have to be met by ever-thicker blizzards of dollars.
The FDIC might be able to pay the claims, but in worthless dollars.
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Re: Let's talk about FDIC
by DantesPeak » Wed 26 Mar 2008, 22:48:58
$this->bbcode_second_pass_quote('', 'T')he taxpayers would have to pay for it, Dante?
Technically, taxes won't be raised but the money should be borrowed because the Treasury is not authorzied to issue fiat money.
That's why the Fed was created to get around that restriction.
I suppose in the meltdown that may occur, all rules will be thrown away and fiat money or Fed credit will be issued to account holders.
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Re: Let's talk about FDIC
by Heineken » Wed 26 Mar 2008, 22:53:25
$this->bbcode_second_pass_quote('DantesPeak', ' '). . . all rules will be thrown away.
I think they are being thrown away NOW.
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"Things have entered a stage where the only change that is possible is for things to get worse."
---I & my bro.
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Re: Let's talk about FDIC
by smallpoxgirl » Wed 26 Mar 2008, 22:58:02
$this->bbcode_second_pass_quote('Heineken', 'I')s that BIF money really there? In what form? Is it real money or just data on a card?
Well...sort of. They don't have 40 billion one dollar bills in a vault. What they have are Treasury Securities. The money is loaned out to the US treasury. That BIF pool though, is really just big enough to cover a minor string of bank failures like in the late 80's. It's pretty clear that even double that rate would pretty quickly bankrupt the BIF.
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Sifting through the ashes every day
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Now is nothing more than a memory
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