Dare we mention it? Can the FDIC cover a bank run?

petr, you are a fraud and a liar.

I know it's totally retarded, but I made my wife take out $70,000 (50K Dollars, 10K Pounds, 10K Euros) and throw it in to our safety deposit box with the Kruggerands last week. I don't really think that FDIC will falter, but I guess I'm just as nervous as the next person these days. She thinks I'm nuts, but what else is new?

stakan - please explain to me how much money is in FDIC and what percentage of bank failures does that amount cover.

If you are going to call me a fraud please show your credibility and give some data or links.

Washington Mutual, the Seattle-based savings and loan giant whose stock has been hammered the past week, has raised concern because its demise would be the largest bank failure in U.S. history, putting stress on the Federal Deposit Insurance Corp. to cover depositors.

Washington Mutual yesterday closed at $2 per share, down 27 percent on the day. The stock is 95 percent off its 52-week high. Standard & Poor's downgraded the company's credit rating to junk status, citing the deteriorating housing market.

"The cost to the FDIC if this company fails is likely to be quite high," analyst Rich X. Bove of Ladenburg Thalmann wrote. He estimates the net cost to the FDIC at $24 billion, which is about half of the assets in the FDIC's insurance fund.

Stakan - see Malraux is an example of what is happening. A lot of Americans are starting to pull money out of the bank and put it in their mattresses.

Still waiting for anything from you Stakan besides personal attacks that you dont back up.

But peterfitz, I want to go on record again that I know my attitude in this regard is probably retarded.

malraux - from casual polling, about 50% of people I asked are seriously considering taking cash out of the bank. Not all their cash but more cash than they have ever considered having on hand.

petr, by now you sound like a professional provocateur. Professional is the key word. I'm done reaction to your rants.

As FDIC's reserves are depleted, the surviving banks have to replenish the fund through higher premiums. That raises their cost of doing business, which could have various adverse macroeconomic effects, including a further contraction of credit. Ultimately, if the burden of insurance premiums weakens the survivors too much, a federal bailout of some kind would probably be in the cards.

Malraux: Considering your net worth, sticking a bit of mad money in a little tin box is probably prudent, though spreading your cash over multiple institutions to stay under the insured-balance cap would probably be sufficient. Are you also hoarding bottled water, canned goods and ammo?

The gov't will do everything in the power to calm and placate the masses. They need us to continue to go about our lives and live like automatons while they continue to drive our country in the ground.

stakan - again you offer nothing besides personal attacks. Thanks for contributing nothing.

West81 - very good points. The banks in a good market could either absorb the costs or pass them off to consumers. In this climate, I don't think that they have the choice of absorbing and have to pass it off to the consumer.

None of this looks good, however, I dont think today will be a disaster in the market. I think it will take a few more days or a few weeks to see the next nail in the coffin.

I have seen predictions of bank runs starting toward the end of October and beginning of November.

TheFed - you got it right. No argument with you.

West81st:

LMAO! No, I'm not a card carrying member of the Michigan Militia (though I am originally from Detroit)! Of course, my liquid cash is (or should I say was) spread out over multiple institutions quite some time ago, excepting the case of significant investments in two seperate hedge funds.

There's nothing to fear with a bank run from an FDIC perspective, and those who suggest otherwise have no basis and are also simply trying to foment panic or anarchy. We understand that people like petrfitz profit from other people's panic and misery and take advantage of the less educated and less fortunate.

Just like those friendly Germans or Swiss who would buy up the valuables of the Jews during the Holocaust at firesale prices. They weren't the murderers but they were motivated by greed.

That's the only motivation I can see from petrfitz from his postings. His economic and social philosophy is remarkably inconsistent with his political philosophy, unless he is trying to destroy other's power so he can best benefit from the ability to steal from the poor rather than the existing powers that be.

But to me, not surprising to see someone like malraux take money out of the bank. And then of course put it in a safe deposit box, hardly safe. The real people who are prepared for guys like petrfitz and the disruption of power always had a stash of cash and marketable liquid assets (e.g. gold coins) parked privately ... and next to our Berettas and Walthers.

sane insane - if WaMu goes under it will wipe out 50% of the FDIC. Are you saying that this is not significant? Please explain how the remaining 50% would cover many more banks going under?

Are there extra hundreds of billions the US government has sitting around to throw at this problem? On top of the hundreds of billions are spent bailing out Fannie, Freddie, Bear, etc.

Please explain I am interested in hearing your thoughts on the matter besides your attacks on me.

oh yeah thanks for comparing me to the Nazi's you asshole.

This is shameful of you petrfitz. We had plenty of you to deal with over our centuries and will have plenty more of you are we continue for the next millenia, your kind will always be present but it will never win.

Is this even a question???

Sorta like the "are we in a recession" question???

Give me a break.

FDIC will need to be recapitalized. go to any economics blog and you will find extremely substantive and quantitative reasons why it needs to be recapitalized.

malraux, not retarded at all. Someone emailed me today and asked this same question. I spread $$ across banks months ago. I feel silly admitting it myself, but hey, I did it. I also have 20k in a sock in my top drawer next to a key to a WWII bomb shelter. What can you say?

What the hell does this mean: petrfitz: There is ... talk of ... a possible run on retail banks by November.

Thank goodness you don't have any position of responsibility or credibility in this world.

In an attempt to distill the answer to this thread's question based on th above responses:

Can the FDIC cover a bank run? Yes
Can the FDIC cover widespread runs on the banks? No

Can the FDIC prevent nuclear war or another 9/11 or anthrax attack? No

malraux- why take out the cash (no interest) -- why not have an account at ubs, hsbc, jpmorgan, etc. overseas accounts, etc. to hedge against dollar weakening - etc.

One man's opinion: If the feds committed $85BN to bail out AIG, don't think they's commit whatever it took to make sure FDIC was solvent and able to cover any bank failure - precisely to avoid the bank run?

The answer is no. The FDIC is under water. Banks are getting pennies on the dollar. Homeowners will get less. Homeowners will have to pay.

http://news.yahoo.com/s/ap/20080916/ap_on_bi_ge/bank_deposits_safety

The AIG bailout is a signal that the taxpayer is going to get squeezed. As I feared. Unless we have an October faction in the wings, get your paychecks out fellow taxpayers. Start writing.

So to all you assholes like Stakan who called me a fraud yesterday to question the capitalization of the FDIC, and the complete idiot saneinsane who likened me to the Nazi's yeaterday for also questioning the FDIC capabilities (a complete new trolling low ever on any board), I was so very happy to wake up this morning and see this article:

(I expect apologies from the aholes stated above)

Federal bank insurance fund dwindling By MARCY GORDON, AP Business Writer
Tue Sep 16, 7:49 PM ET

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 may be the lender of last resort.

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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 Tuesday.

Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.

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

Additional failures of large banks or savings and loans 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 98 percent of U.S. banks still meet regulators' standards for adequate capital.

But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.

The fund, which is marking its 75th anniversary this year with a "Face Your Finances" campaign, 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 Chairman 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 Treasury — something that has never been done.

The FDIC's fund is currently below the minimum set by Congress in a 2006 law. The failure of IndyMac Bank in July cost $8.9 billion.

Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. That plan is likely to be approved by the FDIC board, which consists of her, Comptroller of the Currency John Dugan, Thrift Supervision Director John Reich and two other officials.

Bair also is considering a system in which banks with riskier portfolios would be charged higher premiums, raising the possibility those costs could be passed on to consumers.

A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets.

By comparison, WaMu and its subsidiaries had assets of $309.73 billion as of June 30 and IndyMac had $32 billion when it shut down.

Arthur Murton, director of the FDIC's insurance and research division, said that when large institutions have failed in recent years, the hit to the fund has been about 5 to 10 percent of the company's assets.

Standard & Poor's Ratings Service late Monday cut its counterparty credit rating on WaMu to junk, action that followed downgrades by both Moody's and Fitch last week. Concern about the Seattle-based thrift, which has significant exposure to risky mortgage securities and other assets, has grown in recent weeks, and the company's stock price has plummeted.

WaMu responded Monday by saying that it did not expect the S&P downgrade to have a material impact on its borrowings, collateral or margin requirements. The bank said its capital at the end of the third quarter on Sept. 30 is expected to be "significantly above" required levels and that its outlook for expected credit losses is unchanged.

Some analyst estimates put the cost of a WaMu failure to the FDIC at more than $20 billion, but other experts say it is very difficult to predict. Unknown, for example, is the amount of advances that institutions may have taken from one of the regional banks in the Federal Home Loan Bank system. Banks and thrifts have significantly increased their requests for advances, or loans, from the 12 regional home loan banks since the mortgage crisis began last year.

These amounts aren't publicly disclosed but must be repaid if a bank or thrift fails, notes Karen Shaw Petrou, managing partner of Federal Financial Analytics.

If the FDIC doesn't have enough cash to cover the initial costs of a bank or thrift failure, one option would be short-term loans from the Treasury. That last happened in 1991-92, during the last part of the savings and loan crisis, when the FDIC borrowed $15.1 billion from the Treasury and repaid it with interest about a year later.

Based on projections of possible scenarios of bank failures, "between the (insurance) fund that we have now and our ability to draw on the resources of the industry ... we do have the resources" needed, Murton said Tuesday.

Though short-term borrowing from Treasury for working capital may be possible, he said, tapping the long-term credit line is unlikely.

But Whalen said the Federal Reserve, the Treasury and Congress should "immediately devise" and announce a plan to backstop the FDIC with up to $500 billion in borrowing authority to meet cash needs for closing or selling failed banks.

"While the FDIC already has a credit line in place and this figure may seem excessive — and hopefully it is — the idea here is to overshoot the actual number to reinforce public confidence," Whalen wrote in a note to clients. "Simply having Treasury Secretary Hank Paulson or Ben Bernanke making hopeful statements is inadequate. Like it says in the movies: 'Show us the money.'"

Before Congress passed the law overhauling deposit insurance in 2006, about 90 percent of all insured banks and thrifts — considered to have adequate capital and to be well managed — paid no premiums to the FDIC. Today, all of them do.

There were 117 banks and thrifts considered to be in trouble in the second quarter, the highest level since 2003, according to FDIC data released last month. The agency doesn't disclose the names of institutions on its internal list of troubled banks. On average, 13 percent of banks that make the list fail. Total assets of troubled banks tripled in the second quarter to $78 billion, and $32 billion of that coming from IndyMac Bank.

Last month, Bair called those results "pretty dismal," but said they were not surprising given the housing slump, a worsening economy, and disruptions in financial and credit markets. "More banks will come on the (troubled) list as credit problems worsen," he said. "Assets of problem institutions also will continue to rise."

__

AP Business Writer Christopher S. Rugaber contributed to this report.

manhattanfox:

The whole point is that I already have money spread out all over the place, but in the (very remote) event that the entire system crashes and accounts are frozen, locked, and/or lost, I can salve my puny sense of self worth and belief in all financial institution by grabbing a couple hundred K in cash n' kruggerands quickly out of the ol' SDB. As I said above, I know it's a retarded p.o.v., and my wife thinks I'm nutty, but I sleep better at night for having done it.

Malraux - I am starting to stash cash as well. Here is my really nutty question. If you put cash in a SDB and that bank goes under will they shudder their doors and restrict access to boxes or just access to cash?

It would suck to have a cash position that you cant access for a few days or weeks when you really need it. I know it is a really nutty question, but one that I feel like I need to know the answer to.

I think that a bank run may be more of a possibilty than we think, and possibly sooner than we think.

My experience is that even when they close teller windows they ALWAYS reopen and allow access to boxes (though yes, they may close completely for a few days, which is why I also have C & K in my floor safe as well!).

petrfitz...you have me worried so i also will be taking money out...let say $200.00.

perftriz - prague noah here! the answer is NO. For confidence reasons, even if they could, they will need to be recapitalized and i am willing to bet that a recaptialization of fdic is in 'high level talks' right now. It will probably be a big number, to ease crisis of confidence that seems to be bubbling over.

With Wamu very close to failing or being rescued, a mass consumer crisis of confidence is scarily near. This is global now. Nothing can stop the dominoes and its clear the fed/treasury and foreign cbs are likely all talking to each other about this.

I seriously worry about a run on retail banks about to occur here. We are getting close to the end result of this mess, on a mass consumer level. anyone still drinking kool-aid has some very strong self defense mechanisms blinding them from reality.

I have a secret compartment in my underwear with $1000, a power bar, and some Jack Daniels in it.

I, too, have a lever in my bedroom which opens a secret compartment inside my wall which holds $10,000, 20 gold bars, Oban, two jiffys, toilet paper, and a box of milky ways. Im set.

petrfitz is less a Nazi than the Communist elite

parkwayhigh and saneinsane are less intelligent and more like party appeasers. Appeasers meant in the German sympathizer sense of the word. Blind allegiance to party whilst those in power are pillaging the world.

petrfitz, during the Russian debt crisis of 1998, Lehman hired ex-KGB agents armed with AK47's to storm small Russian banks and seize the cash, gold and other hard assets from the vaults. I remember they came out of one back with something like $145,000. It seemed silly back then.

urbandigs:

Hilarious! But what's an 'Oban?'

Interesting that you interpreted my statement to mean that you are a Nazi.

That wasn't what I called you.

You are one of those "friendly" citizens of Germany or Switzerland who would buy all of the valuables and heirlooms of the Jews fleeing Germany on the cheap. You would accept the deposits of the Jews to your safe bank, never to return it. No, you weren't the guy with the machine gun. You would never get your elitist hands bloody and you don't care enough about the people being murdered one way or the other. But you do care about the money, so your hands would stay silky soft as you picked the pockets of those less fortunate and took advantage of the bloody work being done by the Nazis.

You are the type who goes to parties and complains about how the powerful are so crass and crude while looking down on their oppressed.

You are one of the most odious people.

And there is ample evidence. You make fun of the people who rent from you. You make fun of the people who work from you. You try to create panic and misfortune.

nice backpedal insane. I have never made fun of anyone that works for me. Please provide proof of your statement.

and please provide proof that I have ever purchased anything from someone who has been harmed or stolen from. You are making completely false allegations, kind of like the McCain campaign.

You are a liar and an appeaser.

I comment on people who rent only to inform them of how stupid it is to pay someone else over 50% of your take home every month.

Please provide your ample evidence?????

Appeaser.

Lowlife thief.

Your ample evidence is on streeteasy. I don't need to provide links to the repeated times that you make fun of renters, telling renters to send you their checks.

I don't need to provide links to how you make fun of your employees. Recently you referred to someone on here by saying "we'll call you employee number 1234861387".

I don't need to prove that you are a slumlord who kicks out long-time tenants.

And I'm not sure who I'm appeasing. One of the few things that makes Barack Obama unattractive to me right now is that you are voting for him.

You are just a notch above the murderers of Nazi Germany.

And no, there was no backpedal. I know you are a smart, educated individual. You can reread what I wrote and see that I didn't call you a Nazi. Blood isn't your game. Only money at any means possible - F the rich and powerful and screw the poor and disenfranchised.

petrfitz
7 days ago
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Steve - you obviously have no idea about what i do. "develop web applications" too funny.

and you translate what other people write, dont even write anything yourself, and day trade in brazilian commodities.

I create content, technology and build companies from the ground up that employ hundreds of people globally, you work for someone esle working on something that other people created.

sorry to be so blunt but you started it. i think that we will now call you employee number 87629405954 exempt.

again more false charges and no proof. I refered to Steve as employeee 123455 and steve is not my employee.

I have never kicked out a long time tenant - please provide proof of your false claim.

I can play your game - sameinsame there is ample prrof that you are a pedifile and you haunt playgrounds around the greater NYC area to find your prey.

I dont need to provide any proof of my statements about you, all i need to do is call you horrible names.

saneeinsame - where does that post say that i "make fun of the people who work from you"

oh yeah it doesnt

petrfitz
about 12 weeks ago
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Wow you guys are so brilliant to call for softening in a real estate market that has been going up for the last 10 years. Man you guys are visionaries.
Too bad you have no idea how to make money in today's world!
Losers, pussies, naysayers. You will get no where. Enjoy it!

petrfitz
about 2 weeks ago
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while you guys have been arguing rent vs buy for the past year, each month you have sent me over 50% of your take pay in rent. In Steve's case he is payig his landlord about $60K per year.
We love that you guys debate this topic and never come to a resolution. Keep on debating but keep on sending your rent checks on time or us landlords will have to levy a late payment fee.
Thanks for paying our mortgages, for our vacations, and for our boats!

malraux - come on, Oban is scotch!

saneinsane is overboard
but petrfitz you have to admit that your attitude toward others is hardly charitable

Oban is a very good single malt scotch and certainly trumps my Jack Daniels.

rather than take out $10 grand and worry about it constantly, I'd advise simply buying a month's worht of food and sticking it in the basement. if there were a run on the banks, inflationary pressure would cause a loaf of bread to be $20.

For those who do not have a basement, rent out one of those cages these condos were peddling for an extra $30-50K per 5x5 unit.

I'm not joking. I'm going to Costco this weekend.

> stakan - again you offer nothing besides personal attacks. Thanks for contributing nothing.

Hmm... sneaky pete calling others out for "not contributing".

Wow, talk about irony.

saneinsane - those posts are pointing out to posters who stupid their renting is an investment strategy is.

Grande - I am not nice but these people need someone to tell them that renting is not an investment. I dont treat them with kid gloves, I tell them exactly what is happening and what the truth is.

it is also funny that saneinsane uses one of my posts to claim that I mistreat my employees which is not the case. That post is actually a response to Steve's demeaning of my and my employees work.

It seems that saneinsane has a hard time reading and comprehending english.