Money for Nothing and Your Checks for Free

Two weeks ago, banking hearings were held in DC with these primary participants: the Media, the Politicians, and the Bankers. The Citizens of this country got a rare opportunity to witness some bigwigs being taken out to the wood shed. Doesn’t happen often in a lifetime, so it’s a spectacle not to be missed. And it did not disappoint. The highlight of the proceedings was that scintillating moment when one of our distinguished Representatives made the comment “….and now you ride in on your bicycles with your Girl Scout Cookies and expect us to…..” After I laughed, I thought, wow, Girl Scouts Cookies just got a bad rap. And I laughed some more. Then I thought - hmmm, this is not going in the right direction. People who aren’t serious about fixing our problems are always recognizable. They focus on making us afraid and telling us who’s to blame. I am not part of this group. Hope you aren’t either. So here’s my response to the Blame game. Blaming the banks, bashing them in the media, will do one thing very effectively. Drive our economy further into a spiral. Why? Because who in their right mind would ever want to be a banker, now? Think about it. You go to a Super Bowl party and you’re having fun, your team’s being whooped, but the little hot dogs in a blanket are delicious. People are talking and it’s the usually stuff, ‘what do you do? How do you know the host?’ And they get to you. ‘I’m a banker,’ you say. Then the room freezes, everyone looks up, total silence. You feel incredible pressure to say something like, “NO! I’m one of the good bankers!” “No, no, we ARE lending.” “No, we didn’t take any TARP.” The room swims in front of your eyes, and people slowly go back to watching the game, a verifiable tension permeates the air. Yup, not fun, who would want to do this job? If there are no bankers, there are no loans, there is no one watching the shop for fraud, identity theft, criminal activities including terrorism. Bankers do a lot for our economy, despite some recently poor judgment. So forget blame, it doesn’t help. Let’s move on to the fear-mongering. What if a bank fails? Folks, we have 8,000 banks in this country, give or take. We don’t need this many; there’s isn’t enough business to go around. A lot of banks will fail, but there is very little reason to be afraid if yours is one of them. In 2008, we had 23 bank failures, compared with none in 2005, 2006, and only three in 2007. So far in 2009, we’ve seen a total of 16 bank failures. Georgia and California lead the pack in numbers when it comes to banks that are failing. Washington State has had two in the 2008-2009 time period, WaMU and Bank of Clark County. What seems to be a huge driver of the bank bashing is the fear of the unknown. As one commentator wrote after my TARP article: “If my bank is FDIC-insured, and I just have a checking account, and am not borrowing money, do I need to worry about it closing and taking my cash? Isn't that what FDIC is supposed to be about?” Yes, that’s what the FDIC is there for. And, no, if you have under $250,000 in a bank, no worries. No, really, I mean it. YOU ARE GOOD TO GO. When a bank is seized, the general process looks like this: FDIC swoops in on a Friday, shuts Bank of Amazing Write Offs down, and reopens the doors under a new name on Monday. You can write your checks, get cash, do most banking transactions again on Monday. And that’s what happens if a buyer isn’t found in advance of the swooping. In the case of WaMU, Chase was hovering like the raptor they are, and swooped in for a fat afternoon snack on a grand old institution. No weekend transition team, just one seamless transition, and then business as usual. If you have over $250,000 in deposits or funds at one bank and there is no buyer of the bank lurking in the shadows, here’s your additional process: you will be contacted by the FDIC claims folks, they will issue you a claim for the amount over the $250k and in many cases will issue you a 50% advance dividend of that amount. The other 50% does get issued as an IOU and makes you a future creditor. Of the 39 bank failures so far in 2008 and 2009, WaMU was the largest in terms of assets at $307 billion, followed by IndyMAC, $32 bn. Then we steadily drop down in size: Downey Savings & Loan in CA had $12 bn, Franklin Bank in TX had $5.8 bn. The rest were small banks with assets between $1 bn and $3 bn. Will more banks fail? Yes, absolutely. Some estimate that upwards of 1000 banks will fail, and the cost to the FDIC will be considerable. But, the FDIC has a sizable fund, and they have the ability to raise more money and already have. Will you get your money? Yes. For those with over $250,000, check out your bank, look for asset size, if your bank is under $3 billion in assets, you have a higher probability of a bank failure. If your bank got TARP money, good sign that that the Treasury folks don’t think they’re throwing good money after bad. Still ask some questions, call your banker. Now stop worrying over bank failures. Manage the fear and blame game. Keep the bank bashing to a minimum, so the banks can keep some of their staff and do the job we want them to. 2009-03-03T22:55:48Z

2009-03-04T03:21:19Z

-10.3264

1508 3418

true

9288

money-for-nothing-and-your-checks-for-free

2009-03-04T03:21:11Z

Ever wonder what will happen if your bank is seized by the FDIC? For most of us, not a whole lot. Read on for the details.

Money for Nothing and Your Checks for Free

2009-03-04T03:21:19Z