San Diego Housing Bubble News and Analysis

My wife and I have $150K with one bank. From what I read, as long as they are joint accounts we are covered to $200K. Is this correct? Any tips and how to make sure I am bulletproof (other than putting the cash in my mattress)?

Here's another link on Calculated Risk on WaMu.

http://calculatedrisk.blogspot.com/2008/...

1year ago WaMu was $42, it closed yesterday at $4.95. I'm kicking myself for not doing a short play last year when the writing on the wall was so clear for WaMu.

Here's the top NYSE shorts as of June 30, WaMu is way up there, along with a bunch of other banks.

http://www.bloomberg.com/apps/news?pid=n...

Waiting for the Bottom,

I believe joint accounts have $200K FDIC coverage.
Please call your bank and verify.

here's some info from official FDIC site.

http://www.fdic.gov/deposit/deposits/ins...

Here's a doomsday scenario that, while not likely, could play itself out in the next few days or weeks as a result of the IndyMac failure. Consider these events:
1. The many depositors with over $100k in their IndyMac accounts are SOL.
2. Depositors in other smaller and weaker banks across the country with over FDIC limits in their accounts panic and withdraw.
3. The weakest banks (Downey, WaMu, Wachovia, etc.) face the biggest flood of withdrawals.
4. The strongest banks get stronger, the weakest fail. (note to stocktradr: Go long on Wells, short Wachovia).
Whether this happens or not, we'll know in a few days.

All along this deflating bubble we've heard the argument there will never be another Great Depression. Given the size of our country now, it's diversification, the international marketplace and of course the government's assurances, I've bought the argument.

Now I'm not so sure. A run on the banks helped cause the GD, and now the banks are running out of money on their own. New manufacturing jobs helped end the GD and circulate wealth domestically. Now we import everything, and continue reducing mfg jobs. Granted our trade deficit is actually declining slightly due to a weak dollar, but there is no massive untapped job source or labor force.

What bank is next? I agree on WaMu, and that may start a bank run despite the FDIC.

SunTrust? KeyCorp?

Bubblesitter

"I'm kicking myself for not doing a short play last year when the writing on the wall was so clear for WaMu."

Why not short it now? 5 to 0 is still a profitable trade. I can tell you that there is currently a run on the bank.Large depositors have been pulling their money out big time this week. That is going to put the dowward spiral in hyper mode. Next week is going to be an interesting week. I am wondering what the government is going to do to keep our banking industry from completely melting down.

Raybyrnes,
Yes, your right there is still good money to be made on short. I'm just a chicken at heart.

Things are just so volatile now and who knows the stock could temporarily jump up 50% on rumours or false hopes. Many folks might get caught up short squeeze. I do believe it will go to 0 eventually.

At no other time in my life have I ever been so risk averse. I have been trying to bulletproof my portfolio for the last year or so, but there is really no such thing if all hell breaks loose. As the old Chinese proverb goes "May you live in interesting times"

http://piggington.com/are_you_more_risk_...

Bubblesitter,

I couldn't find anything on the fdic adding staff. But I could use that info if you can tell me where to find it.

Thanks

I have most of my savings in WaMu, about $40K. I'm not worried about it but wondering if I should be. Any advice?

Here's the link on FDIC staff increase..

http://www.nytimes.com/2008/03/25/busine...

As for the WaMu and $40K. You are insured by FDIC. If WaMu does go under, it just might take some time to withdraw it.

I used to teach Money and Banking. While its true that we have all sorts of safeguards in place now that were not there in the Great Depression and in the numerous bank runs and "panics" of the 19th century, never discount the power of mass psychology to unhinge everything. The speed with which data and rumors now can spread, combined with a lack in faith in what our government and Fed officials tell us could change the rules in unpredictable ways.
The post-mortems on Bear Stearns now show that it should not have happened. Looking back, it appears that the Fed and Treasury did not act quickly and forcefully enough early on. The top guy at B-S kept issuing reassurances that were belied by the data. An injection of liquidity sooner could have prevented the panic that made the over-leveraged, sloppily-run company survive, albeit in reduced form.
This rush for liquidity by depositors could hit a lot of banks in the coming week. The public may not be placated by Treasury and Fed reassurances and start switching their deposits from well-known weak banks to strong ones.
May you live in interesting times.

I have a question.. if a few major banks go under, and there are a 5 million people with 100k.. wouldn't that be highly inflationary? Like here we printed you all new money, but it's only worth $50k now, thanks for helping us out!

You better double and triple check that fact. Better to even get something in writing from the bank (or print from FDIC literature) rather than some verbal promises.

Downey is next. DSL numbers are worse than WM, plus Washinton Mutual is not a "small" regional bank. Yes Washington Mutual should and most likely will fail, but politicians will fight to keep it open. A run on all banks is possible (not likely but ...) if WM fails.

Goodnight, WaMu.
Goodnight, Wachovia.
Goodnight, Sun Trust.
Goodnight, Lehman.

Let's not panic people. Read the FDIC info about Indymac. It explains what to do if you had an account there, a good preview of what can happen if you bank at Wamu (like I do) or any of the others at risk.

Also check out this handy FDIC calculator which tells you if you're covered or not. Read the instructions here then click on "go to calculator".

In summary:

• You're covered up to $250k on IRA accounts
• You've covered up to $100k for all your regular (savings, checking, cd) accounts combined
• You're covered at those amounts per bank
• Naming beneficiaries on any retirement account DOES NOT INCREASE FDIC coverage
• Simply naming beneficiaries on REGULAR accounts does NOT necessarily increase your coverage! It must be a POD (payable on death) account or a trust. This must be specified in the account name!

Read it all here

Bubblesitter,

That is not a Chinese proverb, it is a curse aimed at your enemies.

The FDIC has $52 Billion.

They insure $4.2 Trillion.

Sure...don't worry, people....yet.

What happens when the FDIC can't cover losses?

Monetize it? Hello, hyperinflation!!!!!!!!!!!!!!!!

Panic, people. Now. And never forget the two rules of investing:

1. Don't panic
2. If you are going to panic, be first.

I have a question.. if a few major banks go under, and there are a 5 million people with 100k.. wouldn't that be highly inflationary?

Nope. The law is that the Fed has to raise interest rates to cover FDIC insurance, which is deflationary.

Unless they change the law that is, which I would not be surprised at all to see.

Note that whomever made this law was a genius, as its probably the only thing thats going to save us Greenspan/Bernake induced hyper-inflation. It will cause a deflationary recession, however.

Certificates of Deposit
Are your CDs as safe as you think?

Over the past few years, depositors lost nearly $245 million when their banks failed. Why? Because they exceeded the $100,000 limit of the Federal Deposit Insurance Corporation. Perhaps they got a little careless when they were looking for a high rate certificate of deposit or the highest money market rates.

Unless your bank is ultra-safe, never keep more than $100,000, including interest, in any FDIC insured account. (Note: For some retirement accounts, the limit is now $250,000.) That includes all of the interest you will earn when your CD matures.

For example, if you purchase a 3-year CD earning 5% interest annually, and compounded daily, don't invest more than $86,072 in that CD if you want the interest to accumulate until maturity. It will grow to $100,000 when it matures in 3 years, and all of your money will have been fully protected by FDIC insurance throughout your investment period.

On the other hand, if you invest a full $100,000 into the same CD, and let interest accumulate until maturity, you risk losing as much as $16,200 in uninsured interest if the bank fails. In our opinion, this is an unacceptable risk.

But, if you purchase the same CD and have the interest mailed to you monthly, the total amount not covered by FDIC insurance is only $416.67, your monthly interest earnings. To us, that is an acceptable risk since many banks offer the best interest rate for CDs with a $100,000 deposit or more. (Actually, if your bank fails, you could lose a few months of interest while the FDIC sorts out the details and reimburses the bank's depositors; once again, that is still an acceptable risk in our opinion.)

Multiple accounts

As you may have noticed, we've been discussing a $100,000 limit per account. The basic insured amount per depositor is $100,000, regardless of the number of accounts the depositor owns. But, there are many different ways — all perfectly legal — to structure account ownership so that a depositor can be fully insured for many times the $100,000 limit at a single financial institution if the accounts are set up properly. The examples below are based on the FDIC's online booklet, Your Insured Deposit.

A widow with 3 living children can set up the following fully-insured accounts at one bank and be fully protected with as much as $650,000 of FDIC insurance.

Single ownership accounts such as checking accounts, savings accounts and CDs. (A $100,000 insurance maximum for all accounts combined in this category.)

Retirement accounts such as IRA and self-directed Keogh plans. (Another $250,000 insurance maximum for all accounts combined in this category.)

A testamentary (revocable trust) account, payable upon her death, for each of her 3 children. (Another $100,000 FDIC insurance maximum for each child; $300,000 in total.)

A husband and wife with 2 living children can set up the following accounts at one bank and be fully insured with up to $1,500,000 of FDIC insurance.

Single ownership accounts such as checking accounts, savings accounts and CDs. (The $100,000 insurance maximum for all accounts in this category applies to each person; the husband and wife's total protection is $200,000.)

Retirement accounts such as IRA and self-directed Keogh plans. (Another $250,000 insurance maximum applies to each person; their combined protection is $500,000, giving them a total of $700,000 of FDIC insurance up to this point.)

Joint ownership accounts such as checking, savings and CDs. (Another $100,000 insurance maximum applies to each person; again, their combined protection is $200,000, increasing their total FDIC insurance up to $900,000.)

The husband and wife can each establish a testamentary (revocable trust) account, payable upon death, naming each other as beneficiaries. (Another $100,000 FDIC insurance maximum for each beneficiary; once more, their combined protection is $200,000, increasing their total FDIC insurance coverage to $1,100,000.)

The husband and wife can each also establish a separate testamentary (revocable trust) account, payable upon death, for each of their 2 children. (another $100,000 FDIC insurance maximum for each child for each account; $200,000 total per child. Now, the couple's accounts would be fully insured by the FDIC for a maximum of $1,500,000.)

There are other ways to set up multiple fully-insured accounts in a single financial institution. But once again, it must be done carefully to preserve your full FDIC insurance protection. Surprisingly, your financial institution may not be your best source of help. Instead, we recommend that you obtain the help of a qualified advisor such as an attorney who specializes in estate or elder law.

Finally, you should re-examine your accounts periodically. Several factors, such as a change in your family (a birth, death, marriage or divorce), can change your FDIC insurance coverage. And, if your financial institution merges with another one where you also have accounts, the insurance on your accounts may be affected.

Not all financial institutions are covered by FDIC insurance. To find out if a particular financial institution is covered, click here.

Note: Banks often have branches in several states. If you can't find your financial institution listed in your state, set the "state" pull-down menu on this page to All.

For more information about FDIC insurance, including what it does and does not* cover, the FDIC has prepared an excellent booklet, Questions and Answers about Your Insured Deposit. To view it, click here.

A PDF version of the FDIC booklet is also available by clicking the link in the lower left corner of their Web page. (For more information about PDF documents, click here.)

The FDIC Web site also includes EDIE (the Electronic Deposit Insurance Estimator). As the name indicates, EDIE estimates your FDIC insurance coverage based on your answers to a series of questions about your accounts. For more information about EDIE, click here.

Finally, before investing in a CD, you can check a financial institution's up-to-date financial strength (safety) ratings at TheStreet.com. (Type in the first name of the financial institution and make your selection from the results shown.) If you wish, you can download their comprehensive report that provides details about each financial institution's rating.

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*FDIC insurance does not cover insurance policies, annuities, stocks, bonds, mutual funds, and similar types of investments purchased through a financial institution, regardless of whether you own them directly, through a retirement plan, or through a trust. FDIC insurance also does not cover the contents of safe deposit boxes; ask your insurance agent if your homeowners or renters insurance policy covers your safe deposit box for loss due to theft or damage.

How are credit unions going to hold up through this? Are they safer or less safe than ordinary banks? I know they have a parallel to the FDIC (NCUA), so I'm not interested in the differences between FDIC and NCUA. I'm curious to know how safe or unsafe credit unions are in general compared to regular banks.

To answer the question: Which is next, I went scouring around to see if I could find some useful info.. voila.. a new graph courtesy of financial sight blog.

Entry for this is a bit dated.. but graph is interesting.

Non Performing Assets as %

Select see original from image page to see the lettering. Higher on the graph is worse off. The big downward curved line is Case Shiller HPI. On the right, going down from the top is: Countrywide, Downey Savings, Indymac, a gap followed by Washington Mutual, Wachovia, Wells Fargo and Bank of America. The upward curve in Washington Mutual and Wachovia doesn't look good. They are quickly leaving Wells Fargo and Bank of America behind on % of non-performing, just as Option-ARM resets are arriving.. and we all know that they played in that dirty pool of toxic waste!

Now for another graph from the past:

Mortgage Rate Resets 2007.10

Note the second hump which has a large Option-ARM component and correlate the start of the onset on defaults to the change in curvature of the default rate for Washington Mutual and Wachovia.

BTW: I don't think Wells Fargo is safe.. and as a result of Bank of America's purchase of CFC, I don't think they are safe anymore. Here is more on Wells Fargo by Mr Mortgage..

I wonder if some of the banking industry is being a little lenient as to what is a non-performing loan right now!!

-- Have fun!!

You are correct, according to this wsj article, and that would be a very scary situation. If the FDIC can't cover the bank failures then I'm almost certain the reaction would be monetization. In which case your dollars will be about as useless as if they had been lost anyway.

If this situation makes you panic then I would consider getting into a bank which is fdic or ncua insured but which doesn't have a lot of exposure to the mortgage meltdown. Of course, when the FDIC needs more money they'll raise the rates they charge banks for insurance, so all banks will suffer (and undoubtedly pass the cost on to the consumer).

If there's a run on the banks, all bets are off.

Disclaimer: I am not in the banking industry. I just read a lot and I am very interested in what's happening to my money. I'm not trying to give advice, just trying to get feedback on things I'm considering doing for myself.

Bank analysts are saying between 150 and 300 banks could fail in the next few years:

http://www.forbes.com/reuters/feeds/reut...

Here's a list of banks from the article:

Among the other banks high on the list include Newport Beach, California's Downey Financial Corp (nyse: DSL - news - people ), with a 95.4 percent ratio; Fort Lauderdale, Florida's BFC Financial Corp (nyse: BFF - news - people ), which invests in BankAtlantic Bancorp Inc (nyse: BBX - news - people ) ; Coral Gables, Florida's BankUnited Financial Corp (nasdaq: BKUNA - news - people ); Chicago's Corus Bankshares Inc ; Los Angeles' FirstFed Financial Corp; Troy, Michigan's Flagstar Bancorp Inc (nyse: FBC - news - people ), and Washington Mutual, at 40.6 percent.

The list also includes Puerto Rico's Doral Financial Corp (nyse: DRL - news - people ), First BanCorp (nasdaq: FBNC - news - people ) and Santander BanCorp.

As people pull deposits out from Indymac, WAMU, Downy Savings, Wachovia, they will have to park them somewhere. Someone is the beneficiary. I would say that Wells Fargo becomes one of the beneficiaries of other bank failures. They will get the deposits and shore things up. Just a hunch

What a wild ride this week at the banks, and it is only Wednesday!

WaMu staring around 5, dropping to nearly 3, now up 24% today to 4.5. I don't have the stomach to day trade with such volatility, but there is opportunity for the gambler.

Well Fargo is certainly be one of the beneficiaries of all the flight from risker banks. Wells up 32% today, good news pulled up nearly all the other financials. They announced better than expected earnings and dividend increase.

People are more inclined to deposit money in "safer" banks, even though deposits <100K are FCIC insured in "risky" banks.

I'm still bearish on Downey, WaMu others.

Bubblesitter

WaMu is way down down today.

Very volatile in the last 2 weeks.

We are seeing large unsecured creditors pulling assets out.

http://calculatedrisk.blogspot.com/2008/...

Piggs, if you have >$100K in accounts there, please please consider shifting $ over to any other FDIC insured institution.

Bubblesitter

Here's the bloomberg link

http://www.bloomberg.com/apps/news?pid=2...

FDIC shutters two more regional banks

Carson City, Nev. (AP) -- The 28 branches of 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed late Friday by federal regulators.

http://money.cnn.com/2008/07/26/news/com...