What bad banking news means to you

[CGowen]

NEW YORK (CNN) -- Bad news about the banking industry may have you wondering about the safety of your hard earned cash at your own bank.

In the past year there have been four bank failures.

And the chairman of the Federal Deposit Insurance Corp and banking industry experts foresee many bank failures down the road.

...


Banking experts say there is one thing that will save your money if your bank goes under. That's FDIC insurance. "It's the gold standard," says banking consultant Bert Ely. "The FDIC has ample resources. It's never been an issue," he says.

...

http://edition.cnn.com/2008/LIVING/personal/02/27/bank.safety/index.html


:eyes:

[antigop]

1. "It's never been an issue." ....until now? n/t

[Jim__]

2. Thanks for posting that. - n/t

[opusprime]

3. "Experts say you shouldn't panic."

The experts said the subprime fiasco was contained.

The experts said the FED would be able to save the day by lowering rates.

The experts said that our economy is too resilient to go into recession.


The FDIC has approximately $50 Billion available to them in the case of bank failures. If the current crisis rolls over, and we see a flood of bank failures, the FDIC will not be in a position to help anyone.

Not telling anyone what to do, but we have steadily been accumulating cash in the event of bank runs, which I believe are coming soon.

[fed-up]

4. if my bank fails they will only get $1.87 which is my current balance. :( ..nt

[flashl]

5. How do you read this?

FDIC Girds For Bank Failures


Debra Borchardt
The Street, 02/26/08
http://www.thestreet.com/print/story/10405078.html

...

A record-high $31.3 billion set aside by banks for loan losses, record
trading losses and goodwill expenses dragged down fourth-quarter net
incomes of insured banks to a 16-year low, according to the Federal
Deposit Insurance Corp.'s quarterly banking profile released Tuesday.
The cumulative increase to loan-loss provisions was the largest increase
in 20 years.

...

"The notion that a bank is too big to fail shouldn't be out there," says
Jim Marino, of the FDIC's Division of Resolutions and Receiverships.


The grim picture for banks was reiterated by FDIC's report Tuesday. It
noted that non-current loans exceeded reserves for first time since
1993. Loans that are 90 days past due, jumped 32.5% to $26.9 billion,
the single-largest increase in a quarter in 24 years. The only loan
category with an improving picture was farm loans, no doubt aided by
soaring commodity prices.

...

FDIC spokesman David Barr pointed out that even as assets increase, the
agency is restricted in its ability to get more income for the
Depository Insurance Fund (DIF). The DIF is administered by the FDIC and
is funded through investments and payments by insured banks. The payment
is calculated both on the balance of deposits as well as on the degree
of risk posed to the insurance fund. However, Congress sets the ratio
level and even though it was raised last year to 1.25, the current level
of reserves to insured deposits is only at 1.22. In 2006, it was 1.32.


"Ninety percent of the banks haven't been paying in because the reserve
ratio isn't low enough," he said. "Congress increased the number last
year, but exempted older banks. We're restricted to income on Treasuries."

...

So the FDIC is going to be hitting up banks for more money at a time
when many can least afford it.

...

Last month, the FDIC issued a two-part Notice of Proposed Rulemaking,
seeking comments related to the potential failure of large insured
depository institutions. Marino has been working on this project for two
years.


When a bank fails, the FDIC has to be able to look at all the accounts
of a depositor and figure out how much is insured. "Banks do not know
the insurance status of their customers, nor do they really care,"
Marino said. "What we're saying to larger institutions is that you're
going to have to help us out."

...

The proposed rule the FDIC is considering would require the largest
institutions to modify their deposit systems so that the FDIC could
calculate deposit insurance coverage quickly in the event of failure.

It suggests to me that banks have hidden their current status and the proposed FDIC rule will encourage banks to reveal their TRUE status.

[CGowen]

6. Someone posted that the FDIC is hiring 40% more people for "resolutions and receiverships"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2954886


http://www.marketwatch.com/news/story/ultimate-sell-signal-part-ii/story.aspx?guid=%7BA2FE5E59%2D337F%2D4F6C%2DA974%2D470D6FD8B553%7D

[Dover]

7. At what point did this banking 'crisis' become apparent to the Feds and Bushco?

It seems they knew there was a problem at least as far back as 2006 when they hired Bernanke, who has expertise in the Great Depression when over 4000 banks failed, to handle things. At what point did they decide they had a major problem on their hands? Who benefits from the collapse of a banking system? Might the Fed Reserve itself be headed for the trash can of history? And if so, what might be in the works to take its place?