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Old 07-13-2008, 09:03 AM   #41
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Of course the FED could increase the FDIC/NCUA limits on Monday to some new level that people would be insured to. That would go further to alleviate the "fear problem". After all the "tax payer" is on the hook for all the money the FED has been pumping out to prop up Wall Street and the Banks thus far.
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Old 07-13-2008, 02:18 PM   #42
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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.
I am no apologist for Congress. We all know that what they do is rarely consistent. But I do see a distinction between how hard it is to understand the risks of exotic, complicated mortgage loans and how hard it is to understand "if I deposit more than $100,000, the government may not be insuring it." People deserve more protection from exotic loan products than from uninsured deposits.

Taken to its extreme, would you prohibit folks from making any investment, such as purchasing corporate bonds or stocks or mutual funds, because the investment is not 100% insured by the federal government and the principal is at risk? Many credit unions also have private, not federal, deposit insurance - but disclose this fact prominently. Would you forbid privately insured credit unions from accepting any deposits whatsoever?
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Old 07-13-2008, 02:22 PM   #43
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Of course the FED could increase the FDIC/NCUA limits on Monday to some new level that people would be insured to. That would go further to alleviate the "fear problem". After all the "tax payer" is on the hook for all the money the FED has been pumping out to prop up Wall Street and the Banks thus far.

The Fed can't increase the federal deposit insurance limits. I guess the Fed could, though, let all the IndyMac depositors belly up to the discount window. Wouldn't that be a riot.
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Old 07-13-2008, 02:51 PM   #44
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I think we are comparing Apples to Oranges. BTW I just looked at my "backup" HELOC Mortgage Agreement 4 Pages in English. Not too difficult to understand and I am a HS dropout. But getting back to the FDIC 1950 the limit was $10K, 1960 it was raised to $15K, 1969 to $20K, 1975 to $40K and 1980 to $100K, the powers to be revised it in 2006 to separate out IRA accounts (250K) and left the "other accounts" at 100K. Based on the past it should have been raised to approximately $400K, for a single account, but I guess people should have had enough sense to head to IRA accounts if they wanted to protect more than $100K in a single account. BTW for two people the limit actually is $400K if you do it right (Acct 1=His, Acct 2=Hers, Acct 3=His & Hers and Acct 4=Hers & His; total 400K). Of course the Bank does not inform you how to do this. I have asked, in the past, and was given some BS about "check with your personal FA". Must be something about not wanting to raise their FDIC Insurance Premiums on insured monies.

This is interesting also (quoted, in part):

"The Federal Deposit Insurance Reform Act was a federal law passed in 2005. It contained a number of changes to the (FDIC).
  • It raised the limit on deposit insurance for retirement accounts from $100,000 to $250,000.
  • It provided credits to banks that had paid into the deposit insurance funds in the early 1990s in the aftermath of the S&L Crisis.
  • It requires that the FDIC issue rebates to the banking industry should the level of the deposit insurance fund rise above 1.50% of total insured deposits."
I edited out some posting above. Seems like even the Banks got "credits" and "rebates" ("paybacks" or "kickbacks would be my terms) for insurance premiums they paid into the FDIC - bet the FDIC would like to have those funds today.
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Old 07-13-2008, 03:50 PM   #45
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Taken to its extreme, would you prohibit folks from making any investment, such as purchasing corporate bonds or stocks or mutual funds, because the investment is not 100% insured by the federal government and the principal is at risk?
Not at all the same. This is a bank! Granny has been going to this bank for 50 years. She deliberately avoided all those other risky things because she doesn't want to take a chance with her money. She might be doing just as her husband and she have always done--nothing different, except that over time the account grew beyond the insurance limits. She doesn't even GO to the bank (I went 15 years between physical visits to a bank), so she can't see the sticker at the teller's window. She's got her money there because it is insured by the government, it is safe. This is miles away from a couple making $30K buying a $200K house and lying about their income. Or those of us who lose money in the market.

As a condition of providing this insurance, the FDIC requires that banks meet certain criteria. None of that is true with the other investments you mentioned.

I am not in favor of government funds to bail out mortgage lenders or borrowers. I have much less concern with raising the insurance coverage for individual depositors to at least $500K. Any mildly competent investor can easily get unlimited insurance coverage just by splitting up money between banks, so the only people being put at risk are those wthout enough awareness to do this simple thing. Surely there should be someplace where the financially ignorant can stash funds without worry?
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Old 07-13-2008, 04:25 PM   #46
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Not at all the same. This is a bank! Granny has been going to this bank for 50 years. She deliberately avoided all those other risky things because she doesn't want to take a chance with her money. She might be doing just as her husband and she have always done--nothing different, except that over time the account grew beyond the insurance limits. She doesn't even GO to the bank (I went 15 years between physical visits to a bank), so she can't see the sticker at the teller's window. She's got her money there because it is insured by the government, it is safe. This is miles away from a couple making $30K buying a $200K house and lying about their income. Or those of us who lose money in the market.

As a condition of providing this insurance, the FDIC requires that banks meet certain criteria. None of that is true with the other investments you mentioned.

I am not in favor of government funds to bail out mortgage lenders or borrowers. I have much less concern with raising the insurance coverage for individual depositors to at least $500K. Any mildly competent investor can easily get unlimited insurance coverage just by splitting up money between banks, so the only people being put at risk are those wthout enough awareness to do this simple thing. Surely there should be someplace where the financially ignorant can stash funds without worry?
I am an NCUA employee who advises consumers about federal deposit insurance coverage, and let me assure you that, of all people, Granny understands that there is a limit to federal deposit insurance at banks and credit unions! As you noted, Granny has been around for many years. She has lived through the depression and the S&L crisis, and she knows that banks do fail. Ninety five percent of the telephone calls I get on insurance coverage are from elderly women who mention the $100,000 insurance limit and want to structure their accounts around that limit. I think you will find that very few of the uninsured deposits at IndyMac are owned by Granny.

I agree with you and OAG that Congress could, and should, raise the current deposit insurance limit, maybe to $500,000. Prospectively, though, and not to bail out those with uninsured deposits at IndyMac. But that still leaves the funds above $500,000 uninsured, doesn't it? So there are potentially some funds at the bank that are not safe no matter what the limits are, right?

One thing that has been stated before deserves repeating. In almost all bank failures, the uninsured depositors eventually get more than 85 percent of their uninsured deposit back when the FDIC liquidates the assets of the failed bank. So it is not a great loss for the uninsured depositors. Generally, the only time that 85 percent figure doesn't happen is when there is a massive fraud at the bank. I have seen no word about fraud at Indymac, so the uninsured depositors there will likely get a great percentage of their money back.
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Old 07-14-2008, 10:31 AM   #47
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We should restructure the FDIC-insurance limits on the backs of the taxpayers (maybe not significant but still tangible) for the simple fact that some people aren't competent or responsible enough to take care of their own finances, while those who DO spread out their deposit risk across many banks get no such luck?
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Old 07-14-2008, 10:42 AM   #48
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I am an NCUA employee who advises consumers about federal deposit insurance coverage, and let me assure you that, of all people, Granny understands that there is a limit to federal deposit insurance at banks and credit unions! As you noted, Granny has been around for many years. She has lived through the depression and the S&L crisis, and she knows that banks do fail. Ninety five percent of the telephone calls I get on insurance coverage are from elderly women who mention the $100,000 insurance limit and want to structure their accounts around that limit. I think you will find that very few of the uninsured deposits at IndyMac are owned by Granny.

I agree with you and OAG that Congress could, and should, raise the current deposit insurance limit, maybe to $500,000. Prospectively, though, and not to bail out those with uninsured deposits at IndyMac. But that still leaves the funds above $500,000 uninsured, doesn't it? So there are potentially some funds at the bank that are not safe no matter what the limits are, right?

One thing that has been stated before deserves repeating. In almost all bank failures, the uninsured depositors eventually get more than 85 percent of their uninsured deposit back when the FDIC liquidates the assets of the failed bank. So it is not a great loss for the uninsured depositors. Generally, the only time that 85 percent figure doesn't happen is when there is a massive fraud at the bank. I have seen no word about fraud at Indymac, so the uninsured depositors there will likely get a great percentage of their money back.
isn't all of this a moot point if another bank buys Indymac out of receivership and umbrellas their FDIC coverage overthe accounts of their now "new" depositors??
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Old 07-14-2008, 12:43 PM   #49
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isn't all of this a moot point if another bank buys Indymac out of receivership and umbrellas their FDIC coverage overthe accounts of their now "new" depositors??
Good question. Typically, I believe, the FDIC transfers to a purchasing bank the assets and liabilities of the failed bank, but, on the liability side, the FDIC transfers ONLY the insured portion of the failed bank's deposit base. The FDIC keeps the uninsured deposit liability, and depositors with uninsured deposits receive certificates from the FDIC representing their pro rata interest in the FDIC's recovery (which includes whatever the purchasing bank pays the FDIC for the transferred assets and liabilities). Because the FDIC has been talking about issuing uninsured deposit certificates to IndyMacs depositors and talking about paying an immediate 50% dividend on those certificates, I don't think the FDIC plans to transfer IndyMac's uninsured deposits to any purchasing bank, assuming the FDIC can even find a purchasing bank.

Just a reminder, I am not affiliated with FDIC in any way!!!!
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Old 07-14-2008, 01:20 PM   #50
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Good question. Typically, I believe, the FDIC transfers to a purchasing bank the assets and liabilities of the failed bank, but, on the liability side, the FDIC transfers ONLY the insured portion of the failed bank's deposit base. The FDIC keeps the uninsured deposit liability, and depositors with uninsured deposits receive certificates from the FDIC representing their pro rata interest in the FDIC's recovery (which includes whatever the purchasing bank pays the FDIC for the transferred assets and liabilities). Because the FDIC has been talking about issuing uninsured deposit certificates to IndyMacs depositors and talking about paying an immediate 50% dividend on those certificates, I don't think the FDIC plans to transfer IndyMac's uninsured deposits to any purchasing bank, assuming the FDIC can even find a purchasing bank.

Just a reminder, I am not affiliated with FDIC in any way!!!!
Maybe there's no bank that WANTS IndyMac's customers. Usually another bank will step in and get a bunch of new customers for little or no cost, but there's probably nothing a takeover bank would want, so FDIC just dissolves it, makes the depositors whole as best they can, and moves on..........
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Old 07-14-2008, 04:13 PM   #51
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How long has it been since the $100,000 limit has been raised? Was it back when you could go to a 'five and dime' store?


OK - google says:

The History of FDIC

Quote:
1974: Deposit insurance increased to $40,000.00.
1980: Deposit insurance increased to $100,000.00; FDIC insurance fund is $11 billion.
OK, no inflation since 1980, a $ today is the same as it was 28 years ago. right.

-ERD50
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Old 07-14-2008, 04:21 PM   #52
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Certificate of Deposit Account Registry Service

CDARS® is the Certificate of Deposit Account Registry Service®. And it's the most convenient way to enjoy full FDIC insurance on deposits of up to $50 million.
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Old 07-14-2008, 04:30 PM   #53
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Certificate of Deposit Account Registry Service

CDARS® is the Certificate of Deposit Account Registry Service®. And it's the most convenient way to enjoy full FDIC insurance on deposits of up to $50 million.
Like all "good" deals (and IMO this is not one of them) the "devil is in the details". "They" will decide what you will receive as an interest rate (even if you can get a better one). What are the fees (which further reduces the returns). I would use something like the "EDIE" calculator to stay within the FDIC insurance limits (which can be $400K for a two person system, without simple ownership designations (without the need for using a Trust)).

This is not the first time this program has been discussed here. I would like for someone HERE that has actually used this system talk about it.
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Old 07-14-2008, 04:45 PM   #54
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Like all "good" deals (and IMO this is not one of them) the "devil is in the details". "They" will decide what you will receive as an interest rate (even if you can get a better one). What are the fees (which further reduces the returns). I would use something like the "EDIE" calculator to stay within the FDIC insurance limits (which can be $400K for a two person system, without simple ownership designations (without the need for using a Trust)).
"They" don't decide what the rate is; you decide that when you sign up.

The fees may be excessive but it beats losing 45% of your cash sitting in an Indy account. Of course, as you stated, it's better to do it oneself if one has the time and inclination.
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Old 07-14-2008, 04:46 PM   #55
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How long has it been since the $100,000 limit has been raised? Was it back when you could go to a 'five and dime' store?


OK - google says:

The History of FDIC



OK, no inflation since 1980, a $ today is the same as it was 28 years ago. right.

-ERD50

If you read the history of the last increase.... it was not even in either the bill from the House or the Senate... it was put in by someone during the conference cmty....

NOW, as a taxpayer.... I don't want it to go any higher than $100,000... heck, I would much prefer it go back down to $40K.. If you have the kind of money where you can stick $100,000 in ONE account... then you should have enough sense to spread it around a bit with various banks or S&Ls.... The insurance was for the 'small' depositor.... not the guy who has $500K to put in a CD...
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Old 07-14-2008, 04:51 PM   #56
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I agree with you and OAG that Congress could, and should, raise the current deposit insurance limit, maybe to $500,000. Prospectively, though, and not to bail out those with uninsured deposits at IndyMac. But that still leaves the funds above $500,000 uninsured, doesn't it? So there are potentially some funds at the bank that are not safe no matter what the limits are, right?
OhSoClose, those are very good points.

But for today, we're dealing with the $100k limit. What do you advise people who are holding $1 or 2 million, not wanting to stick it in the stock market? Do they open 10 or 20 accounts
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Old 07-14-2008, 04:54 PM   #57
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But for today, we're dealing with the $100k limit. What do you advise people who are holding $1 or 2 million, not wanting to stick it in the stock market? Do they open 10 or 20 accounts
You need to consult EDIE, the FDIC's Electronic Deposit Insurance Estimator.
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Old 07-14-2008, 05:32 PM   #58
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You need to consult EDIE, the FDIC's Electronic Deposit Insurance Estimator.
Cool! Will discuss this in person tomorrow with a banker.
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Old 07-14-2008, 06:10 PM   #59
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But for today, we're dealing with the $100k limit. What do you advise people who are holding $1 or 2 million, not wanting to stick it in the stock market? Do they open 10 or 20 accounts
I have all my accounts in credit unions. Regular deposits are covered by NCUA to $100K per account. You could have up to 3 accounts between you and your spouse and be covered to $300K. IRA accounts are separate and are insured to $250K per person. So that would give you up to $800K for two people.

In addition, my credit union has extra insurance by ESI (excess share insurance) to the tune of $250K per qualifying account for CD and IRAs. So you could have coverage up to $300K + $1250K for two people with three regular accounts and two IRA accounts.

Edit; The joint account would be covered to $200K. Plus there are trust accounts you can have. Too many gory details for me and not enough money.
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Old 07-14-2008, 07:07 PM   #60
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I heard on the news (NBR?) that the fed will pay $.50 on the dollar for deposits over 100K at IndyMac Bank. Needless to say the people in line with over 100K were mad at everyone but themselves. Stupid tax strikes again.
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