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Old 04-03-2010, 01:12 PM   #1
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Bank rating

Can a three star bank go under fast or would it take time to fall to a two or a one star first? The three star rating is from bankrate.com
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Old 04-03-2010, 01:21 PM   #2
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I don't know how quickly it can change. It's been a few months since I checked my bank, which has been 3 stars for the last couple of years. It is now 4 stars
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Old 04-03-2010, 04:24 PM   #3
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Thanks Alan. It is an odd question but important to me.
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Old 04-03-2010, 04:27 PM   #4
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Thanks Alan. It is an odd question but important to me.
While I was concerned over the last couple of years, a thread or 2 on this forum had a number of folks saying that they had been with with banks that had failed but the FDIC insurance process was very easy and painless and they got all their money back extremely quickly, so that helped me relax about it.

Just be sure the money you have is below the FDIC insured limits (and that your bank is covered by FDIC).
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Old 04-03-2010, 04:36 PM   #5
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My bother has 480k in a bank. One CD with 240k and another with 240k. He said they are both insured. One CD has a beneficiary and the other CD has no beneficiary. Both the bank and FDIC told him both CD's are insured but I am just checking. He is the sole owner of both CD's.
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Old 04-03-2010, 04:42 PM   #6
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My bother has 480k in a bank. One CD with 240k and another with 240k. He said they are both insured. One CD has a beneficiary and the other CD has no beneficiary. Both the bank and FDIC told him both CD's are insured but I am just checking. He is the sole owner of both CD's.
That doesn't sound right to me if he is the sole owner of both. Others may chime in with more information, but I would have thought that having different or no beneficiaries would not be the same as 2 different owners.

Have you browsed the FDIC site for more info?

FDIC:When a Bank Fails - Facts for Depositors, Creditors, and Borrowers

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The standard insurance amount currently is up to at least $250,000 per depositor, per insured bank through December 31, 2013. This includes principal and accrued interest up to a total of $250,000. The $250,000 amount applies to all depositors of an insured bank. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor, per insured bank for all account categories except certain retirement accounts (including IRAs) which will remain at $250,000 per depositor, per insured bank.

Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $250,000 at one insured bank and still be fully insured. For more information on deposit insurance coverage, see the FDIC’s brochure “Your Insured Deposits” which can be accessed at FDIC: Your Insured Deposits
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Old 04-03-2010, 04:45 PM   #7
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I also don't think it is a good idea to have no beneficiaries on a CD as it will go into the estate and probate on death of the owner. If beneficiaries are named it by-passes this and goes direct to the beneficiaries.
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Old 04-03-2010, 06:05 PM   #8
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Alan you are right about beneficiaries. Right now it is the insurance I am trying to figure out so I am asking counsel of others on this.
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Old 04-03-2010, 07:58 PM   #9
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Alan you are right about beneficiaries. Right now it is the insurance I am trying to figure out so I am asking counsel of others on this.
Wise move, it may be okay but well worth checking up on.
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Old 04-03-2010, 11:56 PM   #10
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The issue with estates and probate depends upon the state. IN Tx probate is fairly painless, and by having the cd's go to the estate the executor has more flexibility in handling the estate. Note that if you were subject to federal estate tax, typically the executor could go to the beneficiary and get the estate tax due on the direct beneficiary. The only real saving is the lawyers fees involved. Having handled both my parents estates in Tx other than having the cd's listed on the inventory, there was not a big issue, so particularly if a family member is to be the executor, its better to give more flexibility.
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Old 04-04-2010, 12:00 AM   #11
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I have alot of money in CD's at several different banks. I have $150,000+ at 2 different banks so before they upped the FDIC insurance to 250K, I was worried I wasn't completely covered. Currently FDIC will insure up to 250k for an individual owner with no beneficiaries, but that drops back to 100k on 12/31/2013. Anyway, I looked into how to increase the FDIC coverage. One way to do it is to add multiple POD (payable on death) beneficiaries to your CD accounts. You get 250k (100K after 12/31/2013) for each POD....so if you set up 3 POD's you get 750K (300k after 12/31/2013) in FDIC insurance. So now whenever I set up CD's I always add multiple POD's to them to increase the FDIC insurance I have. I'm not sure how this would affect an estate or probate, but I don't care much about that since I'm single.

NOTE: In order for the POD's to qualify:
The beneficiaries must be "qualifying," meaning that the beneficiaries must be the owner's spouse, child, grandchild, parent, or sibling. Adopted and step children, grandchildren, parents, and siblings also qualify. Others including in-laws, cousins, nieces and nephews, friends, organizations (including charities) and trusts do not qualify.

Here's a link to the FDIC web site where you can estimate your FDIC insurance coverage:

https://www.fdic.gov/edie/index.html

I've become alot more aware of how much FDIC insurance I have since I've held CD's at 3 or 4 banks that have failed in the last few years. In all cases, the CD's were either taken over by another bank or I received the proceeds from the CD's within a week.
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Old 04-04-2010, 08:12 AM   #12
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I've become alot more aware of how much FDIC insurance I have since I've held CD's at 3 or 4 banks that have failed in the last few years. In all cases, the CD's were either taken over by another bank or I received the proceeds from the CD's within a week.
DallasGuy were any of these banks three stars when you started with them?
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Old 04-04-2010, 08:48 AM   #13
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DallasGuy were any of these banks three stars when you started with them?
I can't remember their rating, but as long as you have FDIC insurance coverage you're safe. The banks that I held CD's at that went bankrupt were 1) Advanta Bank (liquidated by the FDIC) 2) Washington Mutual (taken over by Chase) 3) Countrywide (taken over by Bank of America). After you open up a CD you can go back and change the beneficiary information by adding POD's and in turn increase the FDIC insruance coverage. It's pretty easy to do. I'd recommend that you go to the FDIC website to make sure you set them up correctly though. Here's a website that discusses setting up POD's, but I'd still double check with either your bank or the FDIC when setting them up.

Update on POD Accounts and FDIC Coverage
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Old 04-04-2010, 10:14 AM   #14
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I wouldn't trust any third party rating with my money. Financial institutions are extremely sensitive to market confidence and can fail nearly as fast as confidence can change. I'd limit my exposure to the FDIC insurance cap. If I had to go over for any reason, I'd monitor the credit my self and track the equity price daily.
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Old 04-04-2010, 10:36 AM   #15
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Thanks for the link DallasGuy! I always wondered about POD requirement in the title of the account because some of institutions I deal with also said they could not put it in, but it should not affect the extra coverage... I guess I should go back an insist again!

@rec7: I also read the rules to mean that 2 accounts at an institution, one POD and one not, would qualify for double the coverage. I checked a couple of times with the credit unions / banks and they seemed to have confirmed, but then again, they also said POD in title is not that important, which I think is wrong now... Obviously, they are all too happy to take the money, so FDIC / NCUA is a better source of information.

As for ratings, I do believe banks can collapse with 3-star ratings. Note that (a) ratings are different at different sites, (b) ratings are refreshed every so often (no more than once per quarter I imagine) and anything can happen in between, (c) companies went into bankruptcies soon after having very high Moody's/S&P500/Fitch ratings, and there is no guarantees anywhere stating that bank cannot go bankrupt without lowered star ratings first. The only guarantees you have are those by FDIC/NCUA.
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Old 04-04-2010, 02:49 PM   #16
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Thank smjsl I ran the FDIC estimator is look like my bother is covered I just wanted to be safe. I also called the FDIC they said he would be covered also. Thanks everyone can't be to safe in these times we are in.
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