FDIC's insurance fund slips below mandated level

[ITsec]

Nothing to see here, move along....

By Marcy Gordon
ASSOCIATED PRESS
WASHINGTON -- Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer might be the lender of last resort.

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said yesterday.

Eleven federally insured banks and thrifts have failed this year, including IndyMac Bank, based in Pasadena, Calif., which is by far the largest shut down by regulators.

Additional failures of large banks or savings and loan companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

Treasury Secretary Henry Paulson said Monday that the country's commercial banking system "is safe and sound" and that "the American people can be very, very confident about their accounts in our banking system." FDIC officials also have said that 98 percent of U.S. banks still meet standards for adequate capital.

The fund, which is marking its 75th anniversary this year, is at $45.2 billion -- the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.

FDIC Chairwoman Sheila Bair has not ruled out the possibility of going to the Treasury for a short-term loan at some point. But she has said she does not expect the FDIC to take the more drastic action of using a separate $30 billion credit line with the Treasury -- something that has never been done.

http://www.dispatch.com/live/content/business/stories/2008/09/17/deposits_0917.ART_ART_09-17-08_C8_BKBBKM2.html?type=rss&cat=&sid=101

[lapfog_1]

1. WaMu alone would evaporate the $45B and most of the $30B

line of "credit".

That's what one economist said on KPHX (Jeff Farias show) on Monday.

[AlCzervik]

3. i just read somewhere that WAMU is carrying 19 billion in bad mortgages and they are now

at junk bond status.

[CoffeeCat]

2. Would I be a complete "chicken little"...

...if I withdrew a good chunk of money out of our bank?

I'll keep money in our checking and $1,000 in short-term savings, but I'm thinking
of withdrawing all monies out of two money market funds. It's not a lot of money,
but I would just like to have a chunk out of the bank because things seem pretty
rocky.

We've got our 401k accounts dependent upon the health of the stock market. That's just
about enough gambling for me.

Geez, having a smart, 'diverse' portfolio these days means that you spread out your risk---and
it seems like there's some risk involved with even keeping dollars in the bank! I read an article
yesterday and there was speculation that 1,000 additional banks will go under.

Those deposits won't be covered by the FDIC--if they're all ready talking about problems covering
current losses.

What's wrong with putting a chunk under my mattress?

[lapfog_1]

6. I know, this sounds silly.

and maybe it is.

But I would certainly give it serious consideration.

And, worse, don't count on the cash (paper) retaining it's value either. buy yourself a few gold coins. or silver. Don't pay much more than market price for the gold. Make sure it's from a reputable firm. And that you have some place where you call sell it again if needed.

[ITsec]

8. The only problem is...

you can't eat gold or silver. If the SHTF, your gold or silver is only worth what someone is willing to pay for it.

Someone much smarter and wealthier than me (a Democrat too) gave me a bit of advice once... invest in what you need to be able to survive with long term.

Take that any way you want.

cheers...

[lapfog_1]

9. You can't eat paper either.

Anyway, I said that you need to have located a buyer for your gold before you buy it.

Precious metals have been a safe haven in times of economic uncertainty for thousands of years. This hasn't changed as far as I can tell. Anyway, you should keep enough cash at hand to meet your needs for at least 3 months (if you have that kind of resources). The gold or silver or whatever would be on top of that and as an alternative to stocks, bonds, T-bills, etc.

[ITsec]

7. We've moved most of our money from the bank to our local Credit Union...

and into a money market savings account, under the advice of our accountant. Credit Unions are insured by the NCUA, not FDIC. CU's are somewhat more stable than many banks at this point, and ours appears to be fairly safe.

But I've also got a share of ca$h stashed away... not under the mattress though... enough to last through a short term SHTF situation.

Not financial advice though... YMMV.... do what thou wilt...

(edited for clarity)

[eshfemme]

4. I'm really worried here too.

Is there a reliable listing of banks that DO have adequate capital? Obviously, they can't provide a list of the banks that comprise that 2% that don't have the capital to back up their deposits since they want to prevent a bank run. But I'm really worried that there's a freak chance that my bank could be included but I can't withdraw my money because I still need to pay my bills.

[Ichingcarpenter]

5. The Feds give an international Corporation $85 billion but don't

take care of our own United States FDIC.