Are banks going to start failing?

[frogger]

Rika, you just need mo' better guns.

[tabs]

I have played the CD game....

Back in S&L bailout days there was decision made to honor all CDs' even if the balance was over $100,000.00. Even though the limit was a $100K.

Yes you can play the game of having multiple Benificaries on an account. Have played that game as well.

Now this is the cavet...If one bank goes all those extra benificaries on a CD will be honored..however if the banks start going like dominos there is NOT ENOUGH money to cover FDIC nor FSLIC... Also the lenght of time needed to receive the insurance will be very lenghty.

There was also a day in the 90's when the $1.00 in, $1.00 out standard almost fell on Money Market Accounts. However the decision was again made to honor that standard.

Let me remind you that there is no insurance on Money Market Accounts they are backed usually by short term govt securities.

Personally if I were playing the CD game I would have only $100K in anyone institution. I would not sweat the compounded interest that has accrued if it was slightly over the 100K mark.

There is also Verisign that rates all banks and savings and loans to see how sound they are. when a Bank or S&L gets into trouble they start to offer higher than standard interest rates on their CDs.

By going in and negioating you can get a 1/4 to 1/2 percent higher interest rate than posted on Jumbo CDs'. I used to do that all the time.

[Porsche-O-Phile]

First off, some of you guys are damn lucky to be worrying about ever hitting the cap for FDIC payouts ($100k). If you have that much $$$ sitting around, you have precious little to b*tch about, IMHO. I'd love to have your problems. . .

That said, has nobody considered the possibility that in the event of a broad collapse/run on banks (which is very possible) that the geniuses in gubmint wouldn't just fire up the old printing press to cover the cost of the FDIC payouts? In doing so, they'd inflate (or possibly hyper-inflate) the currency and while you might get your $100k, it might also cost $10,000 for a loaf of bread by the time you get it.

Something to consider.

Government is good at SPENDING money, not saving it and tucking it away securely in order to make good on the "feel good" promises to shore up markets like they're supposed to.

I'm sure any cash reserves that were squirreled away for bad times have been long since raided by the government, probably to pay for Iraq or similar garbage. At least to whatever extent the drunken-sailor bureaucrats thought they could get away with it. . .

In any case, I wouldn't count on FDIC to save you anymore than I would count on ANY government "backing" or "plan" to save me. I lost faith in our merry band of idiots (both in Washington and Sacramento) long ago. If the schit hits the fan, I'm grabbing my ammo and my provisions and heading for the hills. It's every man for himself at that point and more empty promises from Uncle Sam ain't gonna' change it.

[dtw]

I've got a large amount of cash I need to invest for my company in short term funds. Let's say, an "institutional" amount - a nice lottery payout's worth. Imagine my bemusement at having to actually do substantive research on the various money market funds I was looking at. They're not insured funds, and many of them are not rated. Some of them have been in less-than-savory instruments in the last several months.

At most times in history, you just look for the fund with the highest return, lowest load, and other key features you need, and buy-buy-buy. I simplify a bit but I definitely did a double-take at some of these funds.

[competentone]

Originally Posted by Porsche-O-Phile

... has nobody considered the possibility that in the event of a broad collapse/run on banks (which is very possible) that the geniuses in gubmint wouldn't just fire up the old printing press to cover the cost of the FDIC payouts? In doing so, they'd inflate (or possibly hyper-inflate) the currency and while you might get your $100k, it might also cost $10,000 for a loaf of bread by the time you get it.

Something to consider.

The idea that the government might not honor the FDIC insurance "promise" probably was a good consideration, but only before the government's bailout of Bear Stearns last month.

The fact that they were willing to bail out an investment bank -- where those whose funds were at risk had no expectation of having their funds protected by the government -- is a pretty clear indication about the future actions the government will take when the commercial banks with FDIC insured accounts start collapsing.

Of course, as you note, people will get their $100k, but the purchasing power of that money will be dropping drastically as price inflation skyrockets.

The government will "blame" business for the price inflation rather than admit that it is being caused by their "printing" money -- just like they did in the 1970s, or just like they haven't taken any responsibility for helping to create the current situation!

"When asked how we got into this mess, Bernanke replied that our problems resulted from an excessive credit bubble characterized by aggressive leverage, reckless lending, and extreme risk taking. Absent from his explanation was the Fed's role in irresponsibly setting interest rates below market levels, which mispriced risk, got the party started and kept it raging into the wee hours of the morning. The expressed goal of the Fed for much of this decade was, and is, to encourage and facilitate borrowing and lending."

That quote is from this article, which I would suggest everyone read:
http://www.gold-eagle.com/editorials_08/schiff040408.html

[MRM]

My wife's family was pretty well of before the Chinese revolution. They survived the Cultural Revolution and when I met them in 1991 they had a few one ounce ingots of gold left over. My oldest son got one that was made into a bracelet for good luck, but that's a different story. Knowing how poor they were during the Cultural Revolution I asked why they didn't spend the gold. The answer was that there was nothing to buy. The gold was invaluable but it was valueless at the same time. If the economy collapses to the point that the dollar is worthless, I don't think gold is going to be worth anything either.

[competentone]

Originally Posted by MRM

My wife's family was pretty well of before the Chinese revolution. They survived the Cultural Revolution and when I met them in 1991 they had a few one ounce ingots of gold left over. My oldest son got one that was made into a bracelet for good luck, but that's a different story. Knowing how poor they were during the Cultural Revolution I asked why they didn't spend the gold. The answer was that there was nothing to buy. The gold was invaluable but it was valueless at the same time. If the economy collapses to the point that the dollar is worthless, I don't think gold is going to be worth anything either.

The example of communists taking over an economy is not (at least "hopefully" will not be) the situation our economy experiences.

If businesses are still free to operate, they will keep producing goods and services to "sell" to the public. Since barter is substantially more inefficient than the indirect trading, which the tool of "money" allows, a monetary substitute will be needed if (more like "when") fiat currencies lose substantial value.

History has shown that when money is debased, gold and silver become the natural substitutes used in transactions.

So long as the government doesn't start nationalizing all businesses, a collapse of the U.S. dollar will affect people less severely if they have purchased themselves some "insurance" in the form of precious metals.

[Zeke]

I don't understand. The FDIC insured limit has been 100K for as long as I can remember and that's a long time. Seems simple. Don't place more than 100K in an account. What do people not understand about this? Multiple accounts and move on with life. the US would have to fail to lose the money.

Wayne, that is an interesting bit that will save someone some money someday. Good corrective strategy.