Bank Solvency and FDIC Worries

[TemekuT]

Where do you fellow bloggers park your cash these days?
Which banking institutions do you think are the least exposed? And does anybody out there know anything about the financial strength and housing loan exposure of the Orange County Teachers’ Federal Credit Union?

[waiting hawk]

I spoke in great lengths about this with an old friend of mine that has a daughter in the OC that teaches. He parked 100k in the OC teacher credit union. He said it is written in law that if it is FDIC insured that the government just cannot print off money to cover the money you had. They have to raise rates whatever amount to attract investors to pay back the money. I have my cash in ING direct at the moment.

[SD Realtor]

wh I have my cash in ING direct as well.

[AK]

OCTFCU is insured by the NCUA, not the FDIC.

You should be able to get a Financial Performance Report through NCUA.

I seem to recall an interview with someone from OCTFCU in Lansner’s blog … sounds like they weren’t into exotic loans, and he didn’t seem *that* deluded.

[Critter]

ING Direct is good, I also have a savings account with Emigrant Direct that pays 5.05% – no minimums, no fees, just a place to park money between CD purchases and whatnot.

[waiting hawk]

What is good about Emigrant Direct is they have a 0% rate CC card now. You can cash it all out and invest it back with them at 5%. Read up on it here.

http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1744550

[chewie83]

I have thought about doing something like that. Bank of America offered me a similar thing, a 0% APR on cash advances for an entire year. HOWEVER, they charged a 3% fee upfront, and you have to remember that after taxes, you are really only getting about 4% net back. So, it didn’t make any sense to have such a large hassle for a 1% spread. It would only make sense if someone offered a 0% APR on a cash advance with NO fees upfront. I also thought about lending the cash on prosper.com, but then again you are exposing yourself to greater risk.

[bsrsharma]

This is an interesting anecdote from a FDIC employee involved in the S & L Crisis of the 1980s. Shows the complexities of FDIC insurance. Be careful if you have a bunch of cash!

A LIFE SAVINGS NEARLY LOST

Twelve days after a bank closing in Hennessay, OK, in late 1985, only four FDIC employees remained at the bank to complete a payoff. By then, there were no more than a dozen uninsured depositors with whom we had not met. At noon, an elderly woman walked into the lobby and was shown to my office. We got right to business, and she explained that her husband had just retired after 40 years with a local farmers’ co-op. The couple had four accounts with the bank—a checking account with a few thousand dollars, a savings account with about $10,000, and two Certificates of Deposit, each for $100,000. One CD was in her name, payable upon death to her husband. The other was in her husband’s name, payable upon death to her. The bank had set up these two CD accounts so both would be protected with FDIC insurance. I told the woman that the CDs would be covered with FDIC insurance, but the other two accounts would not because they were set up jointly with her husband. She and her husband were each entitled to $100,000 of protection for the CDs, but they would lose the roughly $12,000 in smaller accounts. The woman sighed at losing $12,000, then told me that her husband had passed away on the same day the bank failed and she could not cope with any more bad news. I was shocked at this revelation because I realized that when her husband died, the CD in his name became her property. So, she was probably going to lose the other $100,000, which only seconds before I had told her was covered by FDIC insurance. I had no choice but to give her the bad news. She became extremely distraught at the thought of losing more than half of her and her late husband’s life savings. FDIC staff decided to consult a senior attorney in Washington about the matter, who asked the time of death. He explained that we were paying out funds based on the ownership at 3:00 p.m. on the day the bank closed, so if the husband was alive then, the insurance limits would cover both of them. I volunteered to call the woman to find out the time of death. The phone rang and rang. Finally, she picked up and I got the answer I was hoping for. Her husband had died at 10:15…p.m. So both CDs were, indeed, covered. I gave a thumbs up! –Robert C. Schoppe

[bsrsharma]

This is an interesting anecdote from a FDIC employee involved in the S & L Crisis of the 1980s. Shows the complexities of FDIC insurance. Be careful if you have a bunch of cash!

A LIFE SAVINGS NEARLY LOST

Twelve days after a bank closing in Hennessay, OK, in late 1985, only four FDIC employees remained at the bank to complete a payoff. By then, there were no more than a dozen uninsured depositors with whom we had not met. At noon, an elderly woman walked into the lobby and was shown to my office. We got right to business, and she explained that her husband had just retired after 40 years with a local farmers’ co-op. The couple had four accounts with the bank—a checking account with a few thousand dollars, a savings account with about $10,000, and two Certificates of Deposit, each for $100,000. One CD was in her name, payable upon death to her husband. The other was in her husband’s name, payable upon death to her. The bank had set up these two CD accounts so both would be protected with FDIC insurance. I told the woman that the CDs would be covered with FDIC insurance, but the other two accounts would not because they were set up jointly with her husband. She and her husband were each entitled to $100,000 of protection for the CDs, but they would lose the roughly $12,000 in smaller accounts. The woman sighed at losing $12,000, then told me that her husband had passed away on the same day the bank failed and she could not cope with any more bad news. I was shocked at this revelation because I realized that when her husband died, the CD in his name became her property. So, she was probably going to lose the other $100,000, which only seconds before I had told her was covered by FDIC insurance. I had no choice but to give her the bad news. She became extremely distraught at the thought of losing more than half of her and her late husband’s life savings. FDIC staff decided to consult a senior attorney in Washington about the matter, who asked the time of death. He explained that we were paying out funds based on the ownership at 3:00 p.m. on the day the bank closed, so if the husband was alive then, the insurance limits would cover both of them. I volunteered to call the woman to find out the time of death. The phone rang and rang. Finally, she picked up and I got the answer I was hoping for. Her husband had died at 10:15…p.m. So both CDs were, indeed, covered. I gave a thumbs up! –Robert C. Schoppe

[bsrsharma]

This is an interesting anecdote from a FDIC employee involved in the S & L Crisis of the 1980s. Shows the complexities of FDIC insurance. Be careful if you have a bunch of cash!

A LIFE SAVINGS NEARLY LOST

Twelve days after a bank closing in Hennessay, OK, in late 1985, only four FDIC employees remained at the bank to complete a payoff. By then, there were no more than a dozen uninsured depositors with whom we had not met. At noon, an elderly woman walked into the lobby and was shown to my office. We got right to business, and she explained that her husband had just retired after 40 years with a local farmers’ co-op. The couple had four accounts with the bank—a checking account with a few thousand dollars, a savings account with about $10,000, and two Certificates of Deposit, each for $100,000. One CD was in her name, payable upon death to her husband. The other was in her husband’s name, payable upon death to her. The bank had set up these two CD accounts so both would be protected with FDIC insurance. I told the woman that the CDs would be covered with FDIC insurance, but the other two accounts would not because they were set up jointly with her husband. She and her husband were each entitled to $100,000 of protection for the CDs, but they would lose the roughly $12,000 in smaller accounts. The woman sighed at losing $12,000, then told me that her husband had passed away on the same day the bank failed and she could not cope with any more bad news. I was shocked at this revelation because I realized that when her husband died, the CD in his name became her property. So, she was probably going to lose the other $100,000, which only seconds before I had told her was covered by FDIC insurance. I had no choice but to give her the bad news. She became extremely distraught at the thought of losing more than half of her and her late husband’s life savings. FDIC staff decided to consult a senior attorney in Washington about the matter, who asked the time of death. He explained that we were paying out funds based on the ownership at 3:00 p.m. on the day the bank closed, so if the husband was alive then, the insurance limits would cover both of them. I volunteered to call the woman to find out the time of death. The phone rang and rang. Finally, she picked up and I got the answer I was hoping for. Her husband had died at 10:15…p.m. So both CDs were, indeed, covered. I gave a thumbs up! –Robert C. Schoppe

[cashman]

I checked bankrate.com and decided to put my money in Ascencia Bank’s money market acct., currently paying 5.35%. It has a higher star rating than Emigrant or ING and pays higher interest. I do worry somewhat about not having FDIC insurance on the amount over $100K, since I have substantially more than that in the account. I checked the bank’s recent earnings report and they claim to have no exposure to subprime loans. Hope they’re not liars like Countrywide. I considered parking my money in my Scottrade acct, since they pay 5% for amounts over 1M, but I wonder if it’s really any safer there. Any thoughts?

[cashman]

I checked bankrate.com and decided to put my money in Ascencia Bank’s money market acct., currently paying 5.35%. It has a higher star rating than Emigrant or ING and pays higher interest. I do worry somewhat about not having FDIC insurance on the amount over $100K, since I have substantially more than that in the account. I checked the bank’s recent earnings report and they claim to have no exposure to subprime loans. Hope they’re not liars like Countrywide. I considered parking my money in my Scottrade acct, since they pay 5% for amounts over 1M, but I wonder if it’s really any safer there. Any thoughts?

[cashman]

I checked bankrate.com and decided to put my money in Ascencia Bank’s money market acct., currently paying 5.35%. It has a higher star rating than Emigrant or ING and pays higher interest. I do worry somewhat about not having FDIC insurance on the amount over $100K, since I have substantially more than that in the account. I checked the bank’s recent earnings report and they claim to have no exposure to subprime loans. Hope they’re not liars like Countrywide. I considered parking my money in my Scottrade acct, since they pay 5% for amounts over 1M, but I wonder if it’s really any safer there. Any thoughts?

[bsrsharma]

cashman,

Being in a somewhat similar situation, I am planning to place all my cash in FDIC insured accounts with highest returns possible in multiple institutions (i.e. not exceeding $100K at a place). After the last weeks BNP Paribas news, I am sceptical about earning reports etc., I suspect most institutions have exposure to real estate, especially residential kind. Also, HELOC, credit card debt will all be impacted by real estate defaults. I saw S & L crisis from up close and if there is one thing I learnt, it is how irrational asset valuations can be.

[bsrsharma]

cashman,

Being in a somewhat similar situation, I am planning to place all my cash in FDIC insured accounts with highest returns possible in multiple institutions (i.e. not exceeding $100K at a place). After the last weeks BNP Paribas news, I am sceptical about earning reports etc., I suspect most institutions have exposure to real estate, especially residential kind. Also, HELOC, credit card debt will all be impacted by real estate defaults. I saw S & L crisis from up close and if there is one thing I learnt, it is how irrational asset valuations can be.

[Author]

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