How safe are your bank deposits?

It may not be as secure as you think it is, FDIC insured or not.

If you have money in a commercial bank, read this and this. Kind of scary.

Two comments.

One: This story, apparently originated by Jonathan Turley and reprinted with few changes several places afterward, broke on April 1st.

Two: Credit unions are owned by their customers, not shareholders. I would never go back to a commercial bank.

Credit union deposits are insured by the gov with the same limits as commercial banks. I kept all of my money in a local credit union until things started looking bad. Then I decided to move the excess/uninsured amount to several commercial banks just to get FDIC insurance on all of it. Now, I'm not so sure that will provide me any security.

The FDIC is funded by premiums paid by member banks. But for many years, the insurance premiums were waived because the gov thought there was no chance of ever needing the funds. Some pessimists (hello, it's me) may believe that the banks played a role in getting the gov to drop the premiums.

The FDIC currently has only a tiny portion of the funds needed to bail out depositors if - okay, when - the banks go belly up because of their insane investment practices. The purpose of the scheme described in the articles (and I have read numerous articles about this scheme over the past few years) is to keep the banks afloat while destroying the financial security of their depositors. The name for this ploy is "capitalism."

Do you doubt for a minute that the banks would execute such a plan?

Maybe I should just convert everything to cash and rent some safe deposit boxes. Or put a safe in the basement. I really wouldn't lose anything by doing this; because of the Fed's policy of loaning money to banks for essentially no interest, CDs and savings accounts which used to pay me scores of thousands a year in interest now pay me a few hundred. At least if I did this, the banks couldn't take my money when they fail.

NoCoPilot wrote:

One: This story, apparently originated by Jonathan Turley and reprinted with few changes several places afterward, broke on April 1st.

Interesting that his blog entry is dated earlier than that. Who told you it was April Fool?

Okay, then. Read this from the Bank of England, and this from the FDIC.

These articles are not as straightforward and transparent as the others, but they say the same thing.

3. Glass-Steagall.

NoCoPilot wrote:

3.  Glass-Steagall.

DEAD!

_Howard wrote:

NoCoPilot wrote:

3.  Glass-Steagall.

DEAD!

Yes, I know Glass-Steagall is dead. That was my point -- the security of our deposits is going to take a legislative solution, not a financial one. The banking industry has already proven it can't self-regulate.

The big commercial banks are still playing Monte Carlo with derivatives using our funds, and the risk is all ours while the profits are all theirs. It's a sucky situation. But it's widely recognized, and everyone knows how to fix it -- beginning with re-enacting Glass-Seagall.

Here's my comfort thought.

There are currently something like $17 trillion in retirement accounts being gambled with by Wall Street, rising to $22 trillion by 2016. That's a lot of money but it's not the full faith & credit of the US, which is between $14.3 and $16 trillion PER YEAR.

If the banks crashed the stock market again, they'd get bailed out again -- with taxpayer money -- and our retirement accounts would not disappear. Diminished maybe but not gone. You think the banks are too big to fail? Try America's retirement. If that were to fail, the country would not survive.

The Government knows this and will do anything to prevent that happening.

NoCoPilot wrote:

There are currently something like $17 trillion in retirement accounts being gambled with by Wall Street, rising to $22 trillion by 2016.  That's a lot of money but it's not the full faith & credit of the US, which is between $14.3 and $16 trillion PER YEAR.

I think you overestimate the credit worthiness of the US.
 

NoCoPilot wrote:

You think the banks are too big to fail?  Try America's retirement.  If that were to fail, the country would not survive.

The Government knows this and will do anything to prevent that happening.

You really are optimistic. Both parties receive massive donations from the financial industry. And we know where the politicians' interests lie.