Are bank accounts really safe?
- Thread starter MiniDowTrader
- Start date
This morning on CNBC an FDIC guy kept saying that they will not run out of money, which is not exactly true.
If 100s of banks go bankcrupt they could run out of money....
"The fund is at $45.2 billion â 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 â 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 â 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."
If 100s of banks go bankcrupt they could run out of money....
"The fund is at $45.2 billion â 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 â 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 â 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."
"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.
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."
http://pimpinturtle.com/2008/09/18/fdic-running-out-of-money.aspx
Also:
http://www.bloomberg.com/apps/news?pid=20601103&sid=amZxIbcjZISU&refer=us
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."
http://pimpinturtle.com/2008/09/18/fdic-running-out-of-money.aspx
Also:
http://www.bloomberg.com/apps/news?pid=20601103&sid=amZxIbcjZISU&refer=us
You can keep it under my mattress. I pay out negative interest, however. 
Thanks for the responses. I'm more worried about pulling up to the ATM one day and finding out I can't access my cash and seeing a sign on the door that says something like, "Due to the financial crisis we will be closed until further notice. More details to come".