June 28, 2006

HP'ers: Get familiar with FDIC and their limits - you'll thank me down the road


Got more than $100,000 in any one institution? Got more than $250,000 in any IRA? Got ETF's or funds like GLD? You may want to make sure when the institution(s) who hold your money go belly-up, as so many will during this housing/mortgage debacle, that you don't lose it all

Historically, insured funds are available to depositors within just a few days after the closing of an insured bank. Since the start of the FDIC in 1933, no depositor has ever lost a penny of insured deposits.

Basic Insurance Amount Is $100,000. The FDIC insures deposit accounts such as checking, NOW and savings accounts, money market deposit accounts, and certificates of deposit (CDs). The basic insurance amount is $100,000 per depositor per insured bank.

The FDIC does not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased these products from an insured bank.

The FDIC also does not insure U.S. Treasury bills, bonds, or notes. These are backed by the full faith and credit of the United States government.

In addition, federal law provides up to $250,000 in deposit insurance coverage for self-directed retirement accounts, such as Individual Retirement Accounts (IRAs).

50 comments:

Anonymous said...

keith: what happens when your bank where you deposited your money from house sold, goes belly under and reneges on its FDIC promise..and the guvment leaves you high and dry.
keith, at least, you had a solid brick & mortar before/

Anonymous said...

Tinton Falls approves revaluation funding, awards contract
Posted by the Asbury Park Press on 06/28/06


BY KEITH BROWN
COASTAL MONMOUTH BUREAU
TINTON FALLS — The Borough Council at a special meeting Tuesday adopted a $500,000 bond ordinance to pay for a townwide property revaluation and awarded a contract to a West New York company to conduct it.

The vote for the bond ordinance, which followed a public hearing during which no member of the public spoke, was unanimous. No council member commented before the vote.

The vote allowed the council to pass a resolution later in the meeting awarding a contract worth $480,000 to Realty Appraisal Company, of West New York, to conduct the revaluation.

The deadline for the revaluation to be completed is Oct. 1. But, according to chief financial officer Stephen Pfeffer, the first tax bill to include the new property values won't come until August 2007.

The company, which has conducted borough revaluations three times dating back to 1978, was the sole company to answer solicitations for bids to conduct the revaluation, Mayor Peter Maclearie said.

Borough property has not been assessed since 1989. The average assessed value of a home in Tinton Falls is $152,005, according to 2005 figures.

Last month, angry residents from the upscale Willowbrook neighborhood off Swimming River Road pleaded with the council to expedite the revaluation, saying their homes are overvalued and that is driving up their property tax bills.

"We're moving on this as lightning quick as we can," Maclearie has said.

Willowbrook residents who attended a May 3 council meeting said they pay an average of $20,000 in property taxes annually.

"If I'm living next to Bon Jovi on the Navesink, I'm happy to pay it," Willowbrook resident Paul Cella, of Sire Stakes Drive, has said.

Clouds are forming said...

If banks do go under in large numbers, that possibility seems to be suggested by the low reserve requirements, where does the FDIC reimbursement come from? The US Gov't is broke and doesn't have many many trillions of dollars to hand out to the sheeple. Will the money get printed? How will this be reflected in the M's (M1, M2, and the now deceased M#)?

How many trillions of ARMs reset this year? If the 100% 80/20 loans have the 20% 2nd default is that like leverage on the 80% first? In other words does $1T of 2nds imply $4T of 1sts at risk?

How does one posture to weather the risky scenario? Gold? Cash? lead?

The Thinker said...

It would seem that the FDIC insurance offers better protection against an isolated bank closure than against a system-wide breakdown. But why do you think banks would close if people start defaulting on their mortgages, I thought the banks sell off the mortgages as soon as they issue them.

Certainly someone will be left holding the bag, but who?

Mamboni said...

If someone has the kind of cash balances where he/she is concerned about FDIC and the like, I have some advise: invest $2000 in a large high-quality safe, bolt it into your foundation, and convert $100K of cash into silver and gold bullion [coins] to be kept at home in the safe at all times. This is the best and cheapest insurance you will ever buy as hence against financial armageddon. This is a no brainer if you compare it to the thousands on dollars one spends each year on various paper insurances (i.e. life, home, etc.), all of which depend on the financial soundness of a large deep corporate entity and the impeccable fiscal integrity of it's owners and managers: think about it.

BubbleShanker said...

Two Questions:

1) Are money markets held at brokerage
accounts such as Fidelity insured
for sure?

2) I thought many of the loans were
dumped off in the secondary market?

No money in the bank said...

Who buys the adjustable 2nd MTGs and HELOCS? I know they sell the 1st mortgages but many of the FBs also got 2nds and 3rds, and HELOC'd those properties the 1st are secured by. What secures the other loans? When the FBs default, the economy slows / drops, and people want their cash to buy gold / silver... then will the banks get crushed? I was reading that the reserve amounts relative to deposits / loans is much less than previous recessions.

This may be the real problem looming. Trillions of dollars in unsecured credit.

As to stashing bullion in a safe - be careful. The safe is obvious. It is a good place to keep SOME of your stash, but you will open it when a thug has a gun to your head. The thug doesn't need to know that most of your stash is squirrelled away in other places. Do not put all the eggs in the same basket.

Anonymous said...

The new banking law that was passed last year allows banks to pay depositors a nominal amount on demand, and delay paying the rest for up to 30 days. Reserve requirements are so ridiculously low now, most banks would have to turn people away if even 5% of their customers tried to withdraw deposits.

Anonymous said...

What is "f" dick kleipfh?

Anonymous said...

I believe it was Henry Ford who once said "People who keep their money in banks deserve what they get: screwed."

devestment said...

Good info Keith. I have been spreading the word on this for several years. A friend who works at B of A went as far as to tell me that it is suppose to cover individual SS#'s up to 100k each but there may be an exclusion for married couples having 100k each in the same institution. Be careful. The insurance contains some doublespeak. I would go 100 k per married couple per institution. Better safe than sorry.

No money in the bank said...

Here is the link (from Daily Reconing):

http://tinyurl.com/hrfpt

"The scene is now perfectly set to reveal the ugly fact that total deposits at the banks are up to $5.2 trillion, which is 47 times bigger than it was in 1995. That's a growth rate of 42% a year, compounded! And the total loans and leases is now $5.7 trillion, which is 27 times bigger than in 1995, which works out to an annual growth rate of 35% a year! Big, Big increases!

Yet against that monstrous, cancerous rise in both assets and liabilities, the required reserves went down from $57 billion in 1995 to only $42 billion today in 2006! Hahahaha! Surprise! Down! Required reserves went down! Hahahaha! To keep the same 0.518 ratio of required reserves against total deposits in the banking system in 1995, the banks would need to have, right now in required reserves, $2.693 trillion! Instead, they have only $42 billion, 1.6% as much!"

Is this the real threat to those of us who are trying to protect what we have earned and saved?

Anonymous said...

I suspect it won't be long before cash transactions in the U.S. are severly limited (say less than $100) so that banks and the Federal Reserve can sidestep this issue of having no reserves in the system. If they need more funds in a crisis or emergency, Bernanke will just tap a keyboard and voila!, here's your money!

Handing out those debit cards after hurricane Katrina was an experiment - look for a much more widespread version in the future, comrades.

Anonymous said...

Clouds are forming said...

Oh, I think the US govt. can pay a little overtime as they crank out fresh US currency to pay you. It's not like they aren't doing that unregulated as I type. They can print new 5's, 10's, 20's..etc anytime they want.

Cash or gold or lead? said...

If that is the case then cash will be a underground currency. What about all the gold / silver coins? There may be a underground market for those also, as seems to be the case where I buy mine with cash. No paperwork except exchanging cash for coins.

The darn dealer is a little greedy today, asking $50 over spot for their Maple leafs when Kitco is $30 over spot. This dealer must think gold is going way up in the near future.

Think I will start buying more lead and stainless steel (guns).

Mamboni said...

To "no money in the bank:"

An acknowledgement and admonition:

Yours is prudent advice: not to put all of one's eggs in one basket. I don't - my metals are partly in safe, partly hidden. I own large dogs and live on 10 remote acres. I own firearms as do most of my neighbors. I'm not playing around: my property is posted - if you enter uninvited you are trespassing and will be treated accordingly.

You are mildly chastised for not acknowledging the author of the words you have reprinted herein: he is none other than the one and only Mogambo Guru. The latter's sardonic writing style is as pungent as a deer dropping in summer. Anyone who quotes the great Mogambo is A-OK in my book - but always credit the source my cautious bank-fearing friend.

Anonymous said...

"They can print new 5's, 10's, 20's..etc anytime they want."

According to several reports from people forced to work overtime, Treasury actually printed two TRILLION in extra currency earlier in the year and then stored it away. Seems they expected some rather large shit pies to hit the fan. Perhaps they uncovered a scheme to contaminate paper money with some chemical or bio agent?

keith said...

for a period when I was here in London I didn't have a UK bank accont set up yet, and my only access to cash was via my ATM card

Well, for 30 days the wells fargo ATM cards went down - as we did chip and pin conversion. I called the bank and they said they'd send a new one that worked right out. 10 days later, no card

I called again, and again, and again. Finally, 30 days later, I got an atm card and got cash. thank god credit cards kept working, but for a lot of stuff, gotta have cash.

living without cash or access to cash is a great lesson.

I just haven't figured out the answers.

Anonymous said...

Who here thinks Rush Limpbonbe will be penile-ized for his latest run in with the law? Will he receive a s"stiff" sentence. D "hard" time? Will republican "erection" hopes for Novemeber be "deflated"?

Oldboy said...

So you're saying my $57.34 in my savings account is safe? Wooshh.

What are you worried about? Banks are run by very responsible people who under no circumstances would tread on the credibility to make millions of dollars writing dubious loans.

Oldboy said...

George Bailey: [yelling at Uncle Billy] Where's that money, you silly stupid old fool? Where's that money? Do you realize what this means? It means bankruptcy and scandal and prison. That's what it means. One of us is going to jail - well, it's not gonna be me.

Anonymous said...

Ha,ha - funny stuff. You think if there is a systemic failure of the financial system you will find out....

We can't even get straight news about the housing bust, Iraq, etc. Any systemic failure will be swept under the rug and heli Ben will hit the printing press.

foreclose_me said...

1) Are money markets held at brokerage
accounts such as Fidelity insured
for sure?


Probably not. There are TWO kinds of accounts that have the words "money market" in them. One kind can be insured, the other can not.

Tom said...

Along with physical Gold, Silver and lead, I think that it is prudent to have 5-10% of your cash under the mattress. You gotta take care of yourself and family first. A little lost interest in exchange for possession is ok with me.

The writings of Richard Daughty aka the The Mogambo Guru can be found here:

http://tinyurl.com/93na6

Gold in them thar hills said...

There are also rumors that the banks in the Carribean have been buying dollar debt (T bills) to make up for the decline in China's and India'a and ________'s appetite for US dollar debt. Maybe that is where the pallets of new Franklins went.

And here is another good reason to have some gold / silver squirrelled away on one's 20 acre property( guarded by large dogs and guns): "I believe the stature and reputation of the dollar as store value has been greatly diminished and undermined over the past decade," Anthony S. Fell, chairman of RBC Capital Markets, said.

http://tinyurl.com/lnzg3

Anonymous said...

good thread...

One thing I started doing the last couple of months: as soon as I deposit a check from a client (I'm independent, no W2 wages) and it clears, I cash it out. I then deposit back enough to pay bills.. cable, CCs, gas, pge, etc. The bank(s) don't have more than 1000 of my money.

Anonymous said...

"The FDIC does not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased these products from an insured bank."

SIPC protects brokerage securities accounts from firms that go under financially. Do your homework before lighting a fire...

http://www.sipc.org/how/covers.cfm

Anonymous said...

"SIPC protects brokerage securities accounts from firms that go under financially."

Sure they do, but their resources are limited. Look at the PBGC, they are flat broke after only a few dozen pension plans went belly up. SIPC would have to stand in line with all the other "insurance" programs in the event of a major financial emergency. And just because they say you are insured doesn't necessarily mean you will have quick access to assets in your accounts.

It might take Congress months to come up with a bailout package and even then there is no assurance you will receive 100% of what you had. The whole FDIC/SIPC thing is smoke and mirrors to bolster confidence in a system that gets shakier every day.

Anonymous said...

Keith - You got my attention...we have a large sum in one bank (savings). To be safe, you are saying divide it into different banks, just not accounts? Thanks.

jj

Anonymous said...

401k's are toast?

Anonymous said...

Random Comments on multiple items:

- Fidelity accounts are *not* FDIC insured. SPIC protection is against fraud in a brokerage firm, and has nothing to do with the investment holdings. If there is market wide fraud, the fund is wiped out. Even a big failure of Fidelity, there will be not be enough in the insurance fund. Of course, if a business fails, the securities on account are used to pay you back at whatever market value. This is why its a fraud only insurance.

- The Federal Reserve will print money if it runs out of FDIC funds. So it will spread the pain. Which is better, no money, or you money back with 30% cheaper dollars.

It is very likely that they will issue some sort of Bond or T-Bill's similar to war or Brady bounds in order to "launder" the money creation and not have a sharp rapid rise in the money supply and inflation, since this could trigger a panic. They will prefer to retire these "bonds" slowly with slow inflation....

- I am in the "problem" of exceeding FDIC limits from time to time. I try and spread through broker sold CD's, with each insured up to 100,000. I have to track which banks have which CD's in order to not accidently buy two from the same bank at the same interval.

- I to have bought some physical gold and guns, but its barely 2% of my portfolio, and just a sh*t hits the fan backup plan...

- Banks have sold of the mortgages they have written, but they then buy back a bunch of "securitized" investments, backed by, you guessed it, mortgage paper. This provides geographic diversification, though not mortgage system. Also spreads the risk from lousy lenders to the others. Of course these are usually various forms of derivatives of varying complexity.

- Regarding Keith and the bank card. Yes, I can feel your pain, and was on a remote assignment once and dependent on my cards. At home, at least I know I have food, water, cash, (and the gold + guns) to ride out an emergency. On the road, you are at the will of a functioning financial system...

Jayman1957 said...

It's good to know your money is guaranteed by a country with a 8 trillion dollar debt
I will sleep well tonight!!

debtor said...

Keith,

You've got some real crazies on the board here. Most of them are running on one big assumption about precious metals that I'm not sure is true anymore: That people see an intrinsic value in it. Unless you own a manufacturing plant the gold and silver being stock-piled will be worth nothing to you. Look at the dollar, men believe it has value and so it has value. Only, with precious metals, the average world citizen doesn't have a clue about how to determine how much an ounce of gold is worth compared to, say, loaves of bread. Further, he won't know how to measure it or how to determine its quality. The adoption of paper currency in the late 18th and early 19th century was slow. People didn't trust it had value. The same process will happen with metals. Just because they're shiny doesn't mean people are going to accept them or do work for them.

In the state of chaos following a world-wide economic collapse (if, indeed, a world-wide utter collapse is even possible) for the first six months people will have to learn about the metals (how to determine quality/value) before it becomes a currency. The problem is, in six months, there will be much more attractive options. Information networks will be brought back online by people who organize and either buy them at rock bottom prices or organize gangs in order to control them. Wireless technologies make the infrastructure very centralized (Just a couple giant antennas per city) and easy to implement. At which point a government begins to rearise (people controlling things through power) and currency becomes a priority.

Of course several nations will be just fine and the use of their currencies will probably be adopted temporarily. Given that the average joe has no assets other than his home he won't be losing all that much except a reliable source of food and fuel for six months.

As for those with assets they will of course lose money but not all of it. If the risk is spread around in various currencies and various stock markets the chances of all of them being completely obliterated is almost zero. Even then, if such a collapse happened most people would lose a lot of their assets just like you and so the prices of things would fall accordingly.

But here's the thing. What's more likely, complete and utter world-wide economic collapse in which all governments fall, all stock markets crash and all currencies are devalued to zero? Or someone at the safe company seeing that you spent $2,000 on a safe and, figuring that there must be something worthwhile in there, attempting to rob you with their own guns? There's no completely safe place for assets. None. The best we can do is spread the risk around. These guys advocating placing assets in a safe more than the amount needed to ride out a six or twelve month state of disaster are completely mismanaging their risk. They'd be better off stock-piling a six or twelve month supply of non-perishable food, ammo and fuel and putting their assets in funds located around the world.

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