Bank Failures?
I don't have full access to the WSJ online. Here's the teaser paragraph:
FDIC Readies for a Rise in Bank Failures
By Damian Paletta
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.
http://online.wsj.com/article/SB120398607404892133.html
FDIC Readies for a Rise in Bank Failures
By Damian Paletta
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.
http://online.wsj.com/article/SB120398607404892133.html
Comments
FDIC Classifies 'Problem' Banks
The FDIC classified 76 banks as "problem" institutions for the fourth quarter of 2007, up from 65 in the third quarter, showing that a growing number of financial institutions are under strain.
"Problem" institutions are those under closer regulatory scrutiny, as the banks are more likely to have weak capital cushions to prevent against failure. The FDIC never identifies which institutions are on the list, as it could lead customers to rapidly withdraw funds from the bank.
The 76 "problem" institutions had combined assets of $22.2 billion, the FDIC said. Federal bank regulators have said they expect to see more bank failures in the future. –Damian Paletta
.
It's no coincidence that Washington Mutual and Countrywide have come up in the top two lenders for CD rates for quite a while now. Can anyone imagine why WaMu and Countrywide are so desperate for desposits they are willing to pay above market rates?
Back in the S&L crisis of the '80s, almost all the lenders that went bust had been offering considerably better interest rates for deposits than you could get anywhere else.
It never ceases to amaze me at how people don't bother to ask why a deal is so great. There's the old adage that if a deal is too good to be true, it isn't.
That said, so long as you don't put a large sum into any single institution you will be covered by deposit insurance. Heck, my own wife took out a WaMu CD, even while I have been shorting their stock!
Of course, this is moral hazard in the extreme, encouraging us to put our money in the most egregiously run institutions since we'll get bailed out anyway if things go bad... But this is the system we live in.
http://www.marketoracle.co.uk/Article3843.html
and look who the top banks are on this website.
Countrywide
Flagstar
and a big banner ad across the top for Indymac.
http://cdrates.bankaholic.com/
Should I be worried about BECU if their CDs are now at 3.76%? It does make me a little skittish.
Not that I want to defend BECU, but we might want to consider avoiding direct comparisons between credit unions and traditional "banks". The two types of organizations fall under different regulatory systems, and have different tax structures, making it difficult to do direct comparisons between the two varieties of lender. Rather, we could compare BECU to all the other credit unions, and Countrywide to all the other normal banks.
There's been talk about what this site should do now that the crash is imminent. I for one would like to see a resource of 'safe' or 'risky' banks/credit unions presented. We already know WAMU is at risk, but who else?
Those with more $$$ than the FDIC limits will probably want to diversify the cash they have on hand, or move it someplace really safe (Switzerland?).
Those with a lot of cash but under the limits will need to decide what they want to do with their money. If it is long term savings (5+ years) they can probably just stay pat. If the bank fails they should get it back eventually. If the savings is for a large shorter-term purchase (house/car/boat), then I'm not really sure what you can do.
Either way, these first two groups can probably make due in day-to-day expenditures using their credit limits, because they probably live at/below their means anyways.
Those with almost no savings might not be remiss to bury a couple hundred in the ground somewhere, since if they have their last check in the bank, they probably can't wait another week to get access to cash to pay their bills.