Thursday, March 5, 2009

The end of FDIC insurance???

I was all set to post about the details of President Obama's housing rescue plan to help you figure out if you qualify for help, until I read this story by the Associated Press' Marcy Gordon:
"The head of the Federal Deposit Insurance Corp. has warned that the fund insuring Americans' bank deposits could be wiped out this year without the money the agency is seeking in new fees from U.S. banks and thrifts."

WTF??

If you're clueless about what that means, let's take it from the top. The FDIC is the government agency that insures bank deposits in the US. It's there to prevent you from losing all the money in your checking or savings accounts should your bank go under. Usually your bank will have a big, black sticker on its doors with the FDIC initials, which is supposed to let you know your money is safe.

In most times, people don't pay the FDIC any attention, which is as it should be: banks, operating as they're supposed to, will have more than enough capital to cover any deposits you make, making the insurance of like your car or home policy: something you carry but rarely, if ever, have to use. Problem is, these ain't most times: so many banks have come so close to failing that even the FDIC is in trouble:
"Without substantial amounts of additional assessment revenue...current projections are that the fund balance will approach zero or even become negative."

That's according to a letter from the FDIC's chairwoman, Sheila Bair, to the heads of the more than 8,300 banks that it insures. Gordon's story goes on that 41 banks have gone belly-up since the start of 2008 and the FDIC projects that over the next four years it'll spend $65 billion to protect consumers whose banks have or will fail.

Do I need to draw a map about why you should be at least a little nervous? You buy car insurance so that if you wreck, you can get the car fixed without going broke. But if your insurance company went under, you'd be out all the money you paid for insurance plus whatever it cost to fix your car or get a new one.

if banks are failing all over the place, and the insurer of all the money you put in the bank says it might not be able to cover you unless it raises more money from those same banks... you get where I'm going with this?

4 comments:

Butterrfly said...

FDIC running out of money? umm what? is that the net statement?

Ummm.. in a word, “yikes!” Our economy is more bleeped up than I realized if that’s true.

So where’s the "safe" place for my savings?

401K, IRA account – umm.. negative return much?

Savings account, money market – um.. kinda insured until the FDIC runs out of money? doh!

Oh.. off shore accounts? What are those swiss up to? They allegedly know how to run a banking system!

smh

Mia6998 said...

And we laughed at our grandparents for keeping their money in their mattresses...I don't even know what to say.

Kadesha said...

So what do you suggest? Go back to stuffing money in the TV or in the mattresses? I mean it might not gain any interest but at least you know it's there. Yeah, this is sad. Luckily, I'm already broke.

laughing808 said...

this is indeed disturbing news.....now what recourse does consumers have!