myurbandream (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
myurbandream) wrote2008-09-26 12:16 pm
myurbandream) wrote2008-09-26 12:16 pm
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we don't want to grow up, but we have to grow up....
so, the gov't bought out wamu just recently.
~
By Liz Pulliam Weston
Customers sweltered in long lines outside IndyMac Bank branches as word spread that regulators had shut down the once highflying institution.
The scene -- folks fanning themselves in the July heat, some even bringing along beach chairs for the wait -- made great images for the media.
But the whole waiting-in-line thing was supremely pointless.
The vast majority of IndyMac depositors were fully insured and didn't lose a dime. Customers could still use ATMs, debit cards and checks to access their money over that weekend as the Federal Deposit Insurance Corp. sorted out the failed bank's business. By Monday, customers could resume all other transactions, including transferring their accounts to another bank if they wanted.
The fact is, we're out of practice when it comes to failing banks. Nearly two decades have passed since the savings and loan crisis took out more than 1,000 financial institutions at a cost to taxpayers of $125 billion.
Unfortunately, we're about to get a refresher course:
Thirteen banks have failed so far this year, including IndyMac, the second-largest institution ever to fail.
The FDIC's list of "problem" institutions grew to 117 at the end of June (the latest total was released Aug. 28), compared to 90 at the end of March. The agency doesn't release the names of banks it worries about, fearing such disclosure will contribute to bank runs, but said assets held by the troubled banks swelled from $26 billion to $78 billion, including the $32 billion held at IndyMac.
Bank analysts predict dozens and perhaps hundreds more failures will come in the coming months, driven by bad mortgage loans, falling home prices and the credit crunch.
Here's what you need to know about the safety of your bank accounts:
Don't expect to call it. It's virtually impossible to tell in advance which institutions will fail. Some can limp along for years and then recover; some can plunge from seeming strength into chaos virtually overnight.
You can (and should) consult ratings services such as Bankrate.com's Safe and Sound system or TheStreet.com ratings so that you have some idea of your institution's relative strength, said longtime banking analyst Bert Ely of Ely & Co. But you should understand that these ratings are largely based on the banks' own reports of their financial condition, known as "call reports." Fraud and other problems can be hidden for months or even years.
"I've been reading call reports for 25 years, and every once in a while I still get surprised," Ely said. "The rating services are not bad, but they're not foolproof."
Know your coverage. Bank accounts are typically insured to a limit of $100,000 per depositor per insured bank. (Find out here if your bank is FDIC-insured.) That limit is pushed to $250,000 for certain retirement accounts, such as individual retirement accounts (IRAs), and you can get even more coverage with so-called "pay on death" accounts that name beneficiaries. If you name your three children as beneficiaries on a POD account, for example, each child would get $100,000 of coverage, for a total of $300,000 for the account.
Talk back: Should we bail out the banks?
To get an estimate of your coverage, check out the FDIC's interactive tool. If your money's in a credit union, your accounts probably are insured to similar limits by another government agency, the National Credit Union Administration. Check here.
Have more money in the bank than you have coverage? Transfer the excess to another bank (not just another branch of the same bank; that doesn't increase your coverage). If your bank fails, you may get back only cents on the dollar for any funds in excess of FDIC coverage limits.
"The best thing you can do," Ely said, "is spread your money around."
Understand the process. If your bank is seized, it could be a nonevent -- or a real hassle.
Regulators usually step in to close a bank on a Friday. Most often, another bank has been lined up to buy the failed bank's business, minus any problem loans and troubled assets. (In IndyMac's case, insured deposits and "substantially all" of the bank's assets were transferred to a new federally charted institution, IndyMac Federal Bank.)
Regulators immediately hand the reins to the FDIC, which works over the weekend to ensure an orderly transition, and the bank reopens under new ownership on Monday. In the meantime, customers can access their accounts using ATMs, checks and debit cards as if nothing had happened. That access continues once the bank reopens.
If a healthy bank can't be found to take over the failed one, however, you'll face more hassles. The FDIC will give you notice that the bank is closing, and then your deposit accounts will be effectively shut down. It may take a few days before you get a check from the FDIC for your insured money.
After the bank closes, you won't be able to use ATMs or debit cards; any checks you've written that haven't cleared will likely be returned to you with the notation "bank closed." You should be given enough notice to avoid writing rubber checks, but if you ignore the FDIC's warning you could face bounced-check fees from merchants and late fees from billers. All this is relatively rare, because the FDIC usually has a buyer lined up, but it's always a possibility.
Your loans and credit accounts, on the other hand, will find a buyer. In the banking world, debts are considered assets with a dollar value that doesn't disappear just because the originating bank has. So you should still make your payments; you'll be contacted by the accounts' new owners with details about any changes. Speaking of which:
Keep your eyes peeled. If your deposits and loans are transferred, you're likely to get plenty of literature from your new bank(s). Read it all. Here's what to look for:
Checking and savings accounts: Terms, fees and interest rates (if any) could all change. Pay special attention to any changes in minimum required balances; if they're higher than those of your old bank, you could incur expensive monthly fees. If you don't like what you see, shop around for another bank or a credit union.
Installment loans: If you had a mortgage, car loan or other installment loan with a failed bank, your interest rate and payments won't be affected by the transfer, but the address where you send your payments might. Pay attention and adjust your online bill payment system so that your payment doesn't go astray. Your new lender could count you as late; even one skipped payment can trash your credit scores. There are plenty of reasons you want to keep your score high.
Revolving credit: Your new bank can change virtually everything about your credit cards and lines of credit, including the interest rate, credit limit, due date, grace period and fees. Note any changes and, again, shop around for a new card or credit line if you don't like what you see.
Safe deposit boxes: Make sure to visit yours soon after the transition and ask whether the fees or due date for payment will change. After all the failures and mergers in the 1980s and 1990s, many depositors who thought they still had free safe deposit boxes found out too late that they didn't, and the contents of their boxes were auctioned off, with the money held by state escheat offices.
Keep some cash at home. Will you need it if your bank fails? Probably not, since in most cases you'll still have access to your accounts. Just in case your bank fails and isn't sold, however, you may want to keep enough cash around to tide you over for a few days. (Having a little cash is also handy in case of natural disasters that can disrupt the electronic banking system.)
Rest assured. With so many banks in trouble, some people are worried about the financial soundness of the FDIC. They point out that IndyMac alone is expected to eat up $4 billion to $8 billion of the FDIC's $53 billion reserves.
What these folks forget is that whole "backed by the full faith and credit of the United States government" thing. If the FDIC runs out of money, the U.S. government (and its authority to tax) will be standing by.
As a depositor, you should find that reassuring. As a taxpayer, maybe not so much.
~
jeez, msn, what's with you being so useful all the time?
~
By Liz Pulliam Weston
Customers sweltered in long lines outside IndyMac Bank branches as word spread that regulators had shut down the once highflying institution.
The scene -- folks fanning themselves in the July heat, some even bringing along beach chairs for the wait -- made great images for the media.
But the whole waiting-in-line thing was supremely pointless.
The vast majority of IndyMac depositors were fully insured and didn't lose a dime. Customers could still use ATMs, debit cards and checks to access their money over that weekend as the Federal Deposit Insurance Corp. sorted out the failed bank's business. By Monday, customers could resume all other transactions, including transferring their accounts to another bank if they wanted.
The fact is, we're out of practice when it comes to failing banks. Nearly two decades have passed since the savings and loan crisis took out more than 1,000 financial institutions at a cost to taxpayers of $125 billion.
Unfortunately, we're about to get a refresher course:
Thirteen banks have failed so far this year, including IndyMac, the second-largest institution ever to fail.
The FDIC's list of "problem" institutions grew to 117 at the end of June (the latest total was released Aug. 28), compared to 90 at the end of March. The agency doesn't release the names of banks it worries about, fearing such disclosure will contribute to bank runs, but said assets held by the troubled banks swelled from $26 billion to $78 billion, including the $32 billion held at IndyMac.
Bank analysts predict dozens and perhaps hundreds more failures will come in the coming months, driven by bad mortgage loans, falling home prices and the credit crunch.
Here's what you need to know about the safety of your bank accounts:
Don't expect to call it. It's virtually impossible to tell in advance which institutions will fail. Some can limp along for years and then recover; some can plunge from seeming strength into chaos virtually overnight.
You can (and should) consult ratings services such as Bankrate.com's Safe and Sound system or TheStreet.com ratings so that you have some idea of your institution's relative strength, said longtime banking analyst Bert Ely of Ely & Co. But you should understand that these ratings are largely based on the banks' own reports of their financial condition, known as "call reports." Fraud and other problems can be hidden for months or even years.
"I've been reading call reports for 25 years, and every once in a while I still get surprised," Ely said. "The rating services are not bad, but they're not foolproof."
Know your coverage. Bank accounts are typically insured to a limit of $100,000 per depositor per insured bank. (Find out here if your bank is FDIC-insured.) That limit is pushed to $250,000 for certain retirement accounts, such as individual retirement accounts (IRAs), and you can get even more coverage with so-called "pay on death" accounts that name beneficiaries. If you name your three children as beneficiaries on a POD account, for example, each child would get $100,000 of coverage, for a total of $300,000 for the account.
Talk back: Should we bail out the banks?
To get an estimate of your coverage, check out the FDIC's interactive tool. If your money's in a credit union, your accounts probably are insured to similar limits by another government agency, the National Credit Union Administration. Check here.
Have more money in the bank than you have coverage? Transfer the excess to another bank (not just another branch of the same bank; that doesn't increase your coverage). If your bank fails, you may get back only cents on the dollar for any funds in excess of FDIC coverage limits.
"The best thing you can do," Ely said, "is spread your money around."
Understand the process. If your bank is seized, it could be a nonevent -- or a real hassle.
Regulators usually step in to close a bank on a Friday. Most often, another bank has been lined up to buy the failed bank's business, minus any problem loans and troubled assets. (In IndyMac's case, insured deposits and "substantially all" of the bank's assets were transferred to a new federally charted institution, IndyMac Federal Bank.)
Regulators immediately hand the reins to the FDIC, which works over the weekend to ensure an orderly transition, and the bank reopens under new ownership on Monday. In the meantime, customers can access their accounts using ATMs, checks and debit cards as if nothing had happened. That access continues once the bank reopens.
If a healthy bank can't be found to take over the failed one, however, you'll face more hassles. The FDIC will give you notice that the bank is closing, and then your deposit accounts will be effectively shut down. It may take a few days before you get a check from the FDIC for your insured money.
After the bank closes, you won't be able to use ATMs or debit cards; any checks you've written that haven't cleared will likely be returned to you with the notation "bank closed." You should be given enough notice to avoid writing rubber checks, but if you ignore the FDIC's warning you could face bounced-check fees from merchants and late fees from billers. All this is relatively rare, because the FDIC usually has a buyer lined up, but it's always a possibility.
Your loans and credit accounts, on the other hand, will find a buyer. In the banking world, debts are considered assets with a dollar value that doesn't disappear just because the originating bank has. So you should still make your payments; you'll be contacted by the accounts' new owners with details about any changes. Speaking of which:
Keep your eyes peeled. If your deposits and loans are transferred, you're likely to get plenty of literature from your new bank(s). Read it all. Here's what to look for:
Checking and savings accounts: Terms, fees and interest rates (if any) could all change. Pay special attention to any changes in minimum required balances; if they're higher than those of your old bank, you could incur expensive monthly fees. If you don't like what you see, shop around for another bank or a credit union.
Installment loans: If you had a mortgage, car loan or other installment loan with a failed bank, your interest rate and payments won't be affected by the transfer, but the address where you send your payments might. Pay attention and adjust your online bill payment system so that your payment doesn't go astray. Your new lender could count you as late; even one skipped payment can trash your credit scores. There are plenty of reasons you want to keep your score high.
Revolving credit: Your new bank can change virtually everything about your credit cards and lines of credit, including the interest rate, credit limit, due date, grace period and fees. Note any changes and, again, shop around for a new card or credit line if you don't like what you see.
Safe deposit boxes: Make sure to visit yours soon after the transition and ask whether the fees or due date for payment will change. After all the failures and mergers in the 1980s and 1990s, many depositors who thought they still had free safe deposit boxes found out too late that they didn't, and the contents of their boxes were auctioned off, with the money held by state escheat offices.
Keep some cash at home. Will you need it if your bank fails? Probably not, since in most cases you'll still have access to your accounts. Just in case your bank fails and isn't sold, however, you may want to keep enough cash around to tide you over for a few days. (Having a little cash is also handy in case of natural disasters that can disrupt the electronic banking system.)
Rest assured. With so many banks in trouble, some people are worried about the financial soundness of the FDIC. They point out that IndyMac alone is expected to eat up $4 billion to $8 billion of the FDIC's $53 billion reserves.
What these folks forget is that whole "backed by the full faith and credit of the United States government" thing. If the FDIC runs out of money, the U.S. government (and its authority to tax) will be standing by.
As a depositor, you should find that reassuring. As a taxpayer, maybe not so much.
~
jeez, msn, what's with you being so useful all the time?