I think you guys taking this too lightly.

There is a serious problem. Banks can not invest in stock markets, plus stock markets been falling lately.
Banks loan investments - have elevated default rate. Business, cars, homeloans.

Other bank investment instruments aren't working either. Government treasures like ibonds are junk. They share prices been in freefall so raising capital by issuing shares or preferred shares is out of the question. They still have large operating expense, people, fancy building, taxes, robberies, expensive executives, etc etc etc.
So how can banks survive? Really?

FDIC can not pay up for 150 banks failure and neither can US government. They clearly sending message Fanny and Freddy and no one else.

Now situation looks very different for NCUA's. US goverment is the guarantor for Federal Credit Unions. Plus I don't think they in same shape as FDIC insured.

To be honest I say diversity is a good think.

BrownTiger said:

FDIC can not pay up for 150 banks failure and neither can US government. They clearly sending message Fanny and Freddy and no one else.

In 1989 500 banks closed and the FDIC handled it. Of course the taxpayers paid for it.

bjg31483 said:This is an honest question that I'm not even sure could happen, but...what happens if FDIC's $53 billion allocation for insuring banks gets used up by 5 or more of the largest banks failing? First IndyMac, next could be Wachovia? and maybe some of the smaller banks, too? Thanks for this discussion.

If it gets to that point, they will just use the federal fund to cover it, or print more money. Either way, the tax payer pay for it.

comptalk said:Never amazes me on the amount of stupidity in the world. Who was the one who said the average person isn't stupid?

P.T. Barnum?

SUCKISSTAPLES said:just had to post this picture of people lining up for hours to get their deposits out of a bank already under FDIC control

The problem is, people are naturally curious when they see a line forming. Some people will get in line without even knowing what they're waiting for. It's usually the illusion that a reward is waiting for them at the end. Other people will ask the next person in line and get half the story. "The bank collapsed and I'm gonna wanna get my money back before they run out!" The longer the line, the worse it is.

I've tried searching for information about the risks to my 401k but am coming up short... Can someone point me in the right direction?

I have a 401k with Fidelity invested in Barclays Lifepath funds. The way I understand it, if Fidelity were to go under, the SIPC would guarantee the first $500K worth of my funds. But what if Barclays goes under? It doesn't appear that my investment would be insured or guaranteed. Is this correct? Is this a credible risk?

lampy2k4 said:Here's a reasonable question I got on my mind.

Lets say a bank with 20b on deposit fails. It has 19b in insured deposits and 1b in uninsured (over the limit, etc). OTS sees that the bank has only 19.5bil in assets and shuts it down.

Wouldn't this mean that the bank has assets to cover the 19b in insured deposits, plus about 500 million leftover to cover half of those deposits over insurance limit? Those people with uninsured funds would get half of their money, and FDIC reserves end up untouched.

I know I am simplifying as there are plenty of other costs, such as salaries for temporary staff, all kinds of organizational expenses to set things up, etc.

If FDIC is saying their cost of this failure will be 4-8b, wouldn't that mean that the bank has only about 19 minus (4-8) = 11-14 billion of assets? If so, why would those who are uninsured get anything, such as 50% advanced dividend being given out?

I tried to research this and look at FDIC historical payouts and assets but ran out of lunch time

Very good question, as I was wondering that myself.

This is the pecking order (see, for example, here: http://www.fdic.gov/bank/individual/failed/IndyMac.html:

- deposits,
- senior debt,
- subordinated debt,
- preferred stock,
- common stock.

So if depositors come ahead of the everyone else, I don't see how there could be a shortfall.

IMB had $32B in assets, and only $17-18B in deposits, and most of those were insured. In order for there to be a shortfall of $4B in insured deposits, then assets must be worth less than $13B, and that's just not possible.

If anyone can shed light on this matter, it would be greatly appreciated.

tolamapS said:So if depositors come ahead of the everyone else, I don't see how there could be a shortfall.

IMB had $32B in assets, and only $17-18B in deposits, and most of those were insured. In order for there to be a shortfall of $4B in insured deposits, then assets must be worth less than $13B, and that's just not possible.

If anyone can shed light on this matter, it would be greatly appreciated.

one commentary on the topic:

http://goldmoney.com/en/commentary.php

another:

http://seekingalpha.com/article/84685-fdic-comments-imply-big-haircut-for-indymac-loans
the superlien is interesting.

thinnwallet said:seventy-five years later, history repeats itself.

http://www.madisonavenuejournal.com/images/Bank%20Run%20New%20York%20April%201933.JPG

notice IndyMac raises interest rate to 4.00% (for balances over 75K). what a coincidence.

Wow. That is amazing. Look at the sign. They were paying 4% on deposits back then (in gold tender). It amazes me now that, with a worthless, I mean weaker dollar, they pay about half that. National average is even lower. Great progress....

SUCKISSTAPLES said:Bank runs are easily avoidable if you know your FDIC limits, structure accounts properly at inception, and you can avoid standing in line, flying into a local branch, etc.In today's WSJ (page C16, or the on-line edition) the article title is "Next Taxpayer Bill: FDIC?". The article claims "Deposit Insurer May See Its War Chest Put to Test As Worries Surround Banks," and "it only holds $53 billion of assets against the $4 trillion-plus of bank deposits it insures." That's only 1.3%. That's enough to make me concerned.