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Old 07-12-2008, 06:46 AM   #21
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IndyMac sounds like something you'd order at the drive-thru.
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Old 07-12-2008, 08:19 AM   #22
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IndyMac sounds like something you'd order at the drive-thru.

Yep, all you have to is call ahead, tell them how much you want, and then glide through the pay booth and pitch your IOU in the hopper. Then proceed to the pickup window and snatch your bag of cash without even stopping.

If you try it today, you better check the bag before you hit the road. It may be full of rocks.
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Old 07-12-2008, 08:28 AM   #23
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Found out when I tried to transfer funds into my checking account to cover a check to a contractor for some work being done. Nasty suprise but not totally unexpected. All our accounts, MM, CDs, are titled to be under the 100k limit. So the bank is back Monday and personal liquidity crisis subsides.

Indy was the largest S&L in Southern California. They had great savings rates and excellent service for a long time. Had my mortgage with them. Never a problem. Watched with some trepidation the slow motion train wreck and chose not to bail with the rest of the lemmings a few weeks ago. Will look for another institution to service my financial needs next week. Thank God for FDIC. No bank panic here. Minor inconvenience.
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Old 07-12-2008, 09:05 AM   #24
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Found out when I tried to transfer funds into my checking account to cover a check to a contractor for some work being done. Nasty suprise but not totally unexpected. All our accounts, MM, CDs, are titled to be under the 100k limit. So the bank is back Monday and personal liquidity crisis subsides.
From the FDIC page:
"Principal and interest on insured accounts, through July 11, 2008, are fully insured by the FDIC, up to the insurance limit of $100,000. You will receive full payment for your insured account. Certain entitlements and different types of accounts can be insured for more than the $100,000 limit. IRA funds are insured separately from other types of accounts, up to a $250,000 limit.
All accounts that exceed the $100,000 insurance limit, and/or all accounts that appear to be related and exceed this limit, are reviewed by the FDIC to determine their ownership and insurance coverage. If you think you might have uninsured deposits you should call the FDIC Call Center to arrange for a telephone interview with a Claims Agent at 866-806-5919."




It is the phrasing in bold (my emphasis) that I have also seen on other bank failures that has made me somewhat hesitant to go beyond the simple 100k limit, even with various titling options such as POD and joint account designations. What this tells me is that they would eventually straighten it out, but in the meantime some of my funds might be tied up.

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Old 07-12-2008, 09:25 AM   #25
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So anyone that had $1,000,000 in Indybank just lost up to $450,000 to the miracle of fractional reserve banking?
Worst case, yes. Which goes to show why most of us here stress the need to spread your money around to remain under full insurance limits.
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Old 07-12-2008, 10:08 AM   #26
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I wonder how many depositors were ever warned by the bank that they had excess funds deposited that may not ever be replaced by the FDIC if the bank went belly up. I'll bet IndyMac never turned away anyone's deposits.

Today's typical computer savvy 15 year old could probably program the bank's computer to red-flag deposits exceeding FDIC limits. The kid probably wouldn't even have to go to the bank to do it, just hack-in from the outside.

That's not the job of a bank to turn away deposits.
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Old 07-12-2008, 12:12 PM   #27
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I wonder how many depositors were ever warned by the bank that they had excess funds deposited that may not ever be replaced by the FDIC if the bank went belly up. I'll bet IndyMac never turned away anyone's deposits.
I'm sure the bank's leaders thought they could squeak by and didn't want to frighten the flock. Still, a well-written notification to depositors ("We don't believe this will become an issue, but given the volatility in the market . . . we would like to help you register your accounts in such a way that you derive the full benefit of the protection offered by the FDIC. This will take just a few minutes of your time . . .). They could have offered some small loyalty incentives to these folks (toaster? $25 gas card?) and generated some goodwill and also had the opportunity to sell some other services while engaged in these meetings. Too bad--a lot of careless depositors are going to get burned.
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Old 07-12-2008, 03:19 PM   #28
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That's not the job of a bank to turn away deposits.
Exactly right. It is not the job of the bank to turn away deposits, and the bank needs deposits to operate. Every teller window at an FDIC-insured bank has a sign that states the FDIC (general) insurance limit of $100,000. The bank's website also displays this sign. If you are not literate or choose not to heed the sign, too bad. Individuals need to take some responsibility for their choices.
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Old 07-12-2008, 03:23 PM   #29
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I'm sure the bank's leaders thought they could squeak by and didn't want to frighten the flock. Still, a well-written notification to depositors ("We don't believe this will become an issue, but given the volatility in the market . . . we would like to help you register your accounts in such a way that you derive the full benefit of the protection offered by the FDIC. This will take just a few minutes of your time . . .). They could have offered some small loyalty incentives to these folks (toaster? $25 gas card?) and generated some goodwill and also had the opportunity to sell some other services while engaged in these meetings. Too bad--a lot of careless depositors are going to get burned.
An interesting idea, but not practicable. Some folks would not be able to restructure their deposits to get them all insured, and so would have to withdraw their deposits. Also, this approach would signal "trouble!!" no matter how you tried to couch the language, and could cause a run on the bank. Just like Mr. Reich accused Mr. Schumer of doing with his inquiry. What a bunch of crock. It was lax FDIC/OTS oversight of IndyMac, not some Senator's letter, that caused the big losses at IndyMac. More OTS-regulated thrift failures to come. Mark my words.
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Old 07-12-2008, 09:47 PM   #30
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Exactly right. It is not the job of the bank to turn away deposits, and the bank needs deposits to operate. Every teller window at an FDIC-insured bank has a sign that states the FDIC (general) insurance limit of $100,000. The bank's website also displays this sign. If you are not literate or choose not to heed the sign, too bad. Individuals need to take some responsibility for their choices.
Oh, I see my error now. It's just like it wasn't the banks responsibility to turn away mortgage business when the borrower had a $30K income and they gave him a 0% down, 3 year adjustable rate deal on a $500K house. I see now.
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Old 07-12-2008, 10:02 PM   #31
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What's the chances of seeing other banks experience a "run" next week? Also, have you checked how much your investments are insured for if your brokerage goes under?
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Old 07-12-2008, 11:32 PM   #32
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What's the chances of seeing other banks experience a "run" next week? Also, have you checked how much your investments are insured for if your brokerage goes under?
Its likely that we will see some other banks put under pressure following the IndyMac collapse. The fear is palpable. Check out Bank United (BKUNA)- they appear likely to be the next.

When you're sitting on as much cash as I am, its a royal pain-in-the-ass to stay under FDIC limits. I haven't always been too diligent about staying insured, but in the last several months have been moving money around to stay covered.

Everyone always assumes that the FDIC only insures to 100k. Thats true, but only for individual accounts. Joint accounts are insured to 200k (100k for each owner) - on top of the individual limits. Thus, for a couple, you could have 400k insured. There is also a third account type - trusts - that could give another 200k of insurance, for a total of 600k for a couple. But I haven't looked into the trust accounts to know much about them.

In my case, being single, I have multiple accounts opened in several banks - individual, and joint with my sister. Thus I am FDIC insured up to 300k per bank.

There are a couple of caveats with the joint accounts. First, your money won't be available as quickly as an individual account. You have to file paperwork with the FDIC to claim your deposits. (Check out the IndyMac FDIC notice..) Second, you must make sure that the bank has a signature card on file with signatures of the account owners. This last point is important - your claim may be denied without it.

You can also check out bank/credit union ratings at bankrate.com. One of the reasons I started moving money around was because the credit union I belong to, and where I was over the limit (the same basic rules as FDIC), had its rating downgraded from "sound" to "underperforming". Yeah, it probably won't fail, but it would be a particularly bad day to wake up one morning to find that the bank/credit union was seized and you were over the limit.

Hopefully all this worry is for nothing. But the financial system seems to be teetering on the brink of collapse. That said, I'm doing what I can to stay within FDIC/NCUA limits.

And has been discussed here before, if the FDIC or NCUA fail to pay depositors due to a catastrophe never before witnessed in this country, then we are all on our own anyway...
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Old 07-13-2008, 12:14 AM   #33
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Some of what people here think is wrong at times.... Banks usually will tell someone if they are at risk of being over the $100,000 limit....

Second, back before branch banking in Texas.... our bank was able to insure $2 million because we had a number of banks under the Bancorp... we just spread the deposit to all the various banks.... easy...

Third... not all banks fail from a 'run'.... our bank was turning away deposits when it went under... we had a LOT of cash... just not a lot of equity... well, in truth... the FDIC DID have a $1 billion gain when it was done... so sometimes they make a mistake...
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Old 07-13-2008, 06:51 AM   #34
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This, I believe, is exactly how 1929-ish started. Fear feeding on its self. Oh and I did check on my pot of 55 CD's to ensure I am FDIC and NCUA covered (fear). Also warned DD who, in the past, has had OVER 100K in one of her checking accounts.

The way I understand the individual problem for Banks is the RESERVE requirement to retain membership in FDIC et. al. Believe the reserve is about 12% and once near the reserve "floor" they have to get more deposits. So a "run" can ultimately put them down

In any event tomorrow morning, and all day I suspect, there will be some good entertainment for those among us that have the time to watch it - CNBC, FOX, etc.,
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Old 07-13-2008, 07:19 AM   #35
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For some reason I think it might be wise for the FDIC to honor the deposits at IndyMac that are above the limits. It only takes one little mistake and .......

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Old 07-13-2008, 07:43 AM   #36
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For some reason I think it might be wise for the FDIC to honor the deposits at IndyMac that are above the limits. It only takes one little mistake and .......

That would really be the fair thing to do and would alleviate much of the concern some may be feeling.
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Old 07-13-2008, 08:30 AM   #37
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Oh, I see my error now. It's just like it wasn't the banks responsibility to turn away mortgage business when the borrower had a $30K income and they gave him a 0% down, 3 year adjustable rate deal on a $500K house. I see now.
I don't agree with your analogy. When a borrower cannot reasonable be expected to repay a loan, it is the bank's responsibility (both for the borrower and the bank's financial stablility) not to make the loan. Also, for uneducated folks and folks with little money or income, they need additional protections from the complicated terms and fine print of exotic mortgages. But literate folks who have hundreds of thousands of dollars to deposit?? They can and should be given additional latitude to make financial decisions, including poor decisions. Again, the FDIC insurance sign is everywhere. If you asked these depositors, they would all probably admit, sheepishly, that they knew the FDIC has deposit limits.

If we wanted to make bank depositors diversify, it would be better just to pass a law or regulation forbidding them to make deposits above the limits in the first place, rather than expecting banks to write them after the fact suggesting they change their deposit structure.
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Old 07-13-2008, 08:35 AM   #38
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That would really be the fair thing to do and would alleviate much of the concern some may be feeling.
It might be the *right* thing to do to alleviate additional panic, but I don't know that I would classify putting taxpayers on the hook for depositors who exceeded deposit insurance limits is really the "fairest" thing to do, either.

That would make it similar to all the other bailouts: maybe not particularly fair to the taxpayers who subsidize irresponsible lending and borrowing, but all things considered probably the best of several bad options.
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Old 07-13-2008, 08:38 AM   #39
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That would really be the fair thing to do and would alleviate much of the concern some may be feeling.
But that would take a change in the law, because Congress has mandated the deposit insurance limits by statute. Over the years, both the FDIC and NCUA have promulgated regulations to expand those limits as much as possible within the scope of the statute, but the FDIC must comply with the current statute and its implementing regulations.

There are public policy reasons for federal insurance limits. One reason is to make it difficult for large deposits to chase hot rates, which itself could destabilize the banking system. If the FDIC or NCUA failed to honor the Congressionally-mandated deposit limits, that could encourage folks to make such large deposits.
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Old 07-13-2008, 08:55 AM   #40
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But that would take a change in the law, because Congress has mandated the deposit insurance limits by statute. Over the years, both the FDIC and NCUA have promulgated regulations to expand those limits as much as possible within the scope of the statute, but the FDIC must comply with the current statute and its implementing regulations.

There are public policy reasons for federal insurance limits. One reason is to make it difficult for large deposits to chase hot rates, which itself could destabilize the banking system. If the FDIC or NCUA failed to honor the Congressionally-mandated deposit limits, that could encourage folks to make such large deposits.
It was my understanding that when they made the last change (250K on IRA) it was also considered to increase "regular deposits insurance" to either 250K or 400K (can't remember which) but they decided to keep that limit to 100K (which BTW was increased from 10K (I think) the last time). So we cut principal amounts and reduce agreed interest rates for "stupid" people who "did not know what they were doing" when putting signatures on ARM's but penalize people that put actual money out of their pockets so the bank could make those loans. Somehow this just reflects the overall stupidity of the entire financial industry as it is now IMHO.
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