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bkkandrew

This from:

How risky are uninsured bank deposits? - MarketWatch

PALM BEACH GARDENS, Fla. (MarketWatch) -- The Federal Deposit Insurance Corp. is gearing up for the prospect of a large bank failure. So double-check that all your deposits, including interest, are well within FDIC insurance limits.

<snip>

If you have uninsured deposits at a bank, should you worry? Possibly. Depositors without FDIC coverage lost money in at least two recent failures -- NetBank, Alpharetta, Ga., and Miami Valley Bank, Lakeview, Ohio.
Of $109 million in uninsured deposits at NetBank, nearly 30% has not yet been reimbursed. Of $14 million in uninsured funds at Miami Valley, only 5.9% of uninsured funds, so far, has been reimbursed.

<snip>

Institutional Risk Analytics, Torrance, Calif., based on FDIC data from that same date, puts Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co, Wachovia Corp. and HSBC Holdings PLC as the riskiest big banks. More recently, Managing Director Chris Whalen cited J.P. Morgan, Citigroup and Bank of America as his chief concerns due to their heavier trading activity.

<snip>

So, no-one inmportant then, Bank of America, JP Morgan Chase, Citigroup, Wachovia Corp and HSBC....

raycarey

i think most people have their cash in FDIC accounts...but you should make sure that you don't have more than 100,000 in one bank...but if it's a joint account, the insurance goes up to 200 K. it's always smart to diversify...even with the banks holding your money.

people should also be slightly concerned about their money market accounts....i think we're going to see some funds 'break the buck' this year or next.

bkkandrew

Meanwhile, the collective sum of all US banks are now technically bust/bankrupt/insolvent/skint/brassic/broke/penniless/short of a bob or two (select your favorite...

See:

FRB: H.3 Release--Nonborrowed Reserves

They now actually have a NEGATIVE sum of money in reserve. Scary...

bkkandrew

While on the UK side of the pond - anyone have accounts with these banks:

From:

Credit default swaps: how to spot the riskiest banks - Money Week

So what is the market telling us now? Riskiest of all the major banks is HBOS, with a senior 5-year debt premium of 78 basis points (0.78% above the 5-year gilt yield of 4.3%, i.e. 5.1%). 5.1% is therefore what they have to pay the market for funds. (If they’re paying you much less that’s not a good risk/reward). RBS, Santander (Abbey National) and Barclays aren’t much better but HSBC and Lloyds are considered by the market to be the safest. If you can get a good rate from either of these banks, then given the risks the market thinks you’re taking, that’s a good deal and you should be able to sleep well at night.


I haven’t mentioned the ex-building societies yes just because they are in a group of their own. Alliance & Leicester and Bradford & Bingley both have 5-year CDS spreads that are flashing major warning signs. When these banks give you a higher savings rate, it’s not because they’re being generous, it’s because they have to compete for funds with rather more secure institutions.
Alliance & Leicester is being made to pay 200 basis points (2%) over the odds for 5-year money (i.e. about 6.33%) so no wonder they are offering savers in excess of 6% - they have to in order to get any funds at all. The implication is that a high savings rate from Alliance & Leicester reflects a higher risk that you won’t get your money back. Such fears obviously only apply to people with very large sums because the system insures savers up to a certain amount (£35,000). Still, I don’t think you want to have your life savings in a bank that the bond market views with such suspicion. The same goes for Bradford & Bingley.
Here too, the spread over risk-free 5-year money is very nearly 2%. The credit market won’t lend to BB/ over 5 years unless BB/ pays nearly 6.3%.
The question you have to ask yourself is: should you accept anything less?
Then, there are the foreign banks who are offering us internet savings accounts. The basic rule of thumb here is: if they’re ING, they’re no worse a risk than a UK high Street bank. If they’re Irish, they’re likely to be over leveraged and a bit more of a worry (especially Anglo Irish Bank). But if they’re Icelandic, then be afraid; these banks are starting to be priced for bankruptcy risk and it’s not clear what protection UK savers might have with these foreign accounts.

who

....has no adverse implications for the availability of reserves to the banking system.

queenrosered1

The FDIC amounts have been increased to 250 thousand per person, per bank, or 500K for a joint account.Still, anyone with large sums in a non-FDIC insured account would be very wise to move them, NOW!We're covered...(crossing my fingers, lol) Thanks!

Butterfly

^ thanks for the info, very useful

people have the false idea that banks and bonds are "secure", whatever the fuck that means.

Banks as we see now act irresponsibly, and they did numerous time in the past, they have a very high risk pattern, and they go down, but people forget about those because it is never a massive event,

Bonds is one of the most risky market with FX,

bkkandrew

More worrying news, see:

The Bush Financial Bust of 2008: “It's All Downhill From Here, Folks”

On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor....as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.”

(http://www.fdic.gov/news/news/financial/2008/fil08002.html#body)
The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.
Good luck.
It's worth noting that, due to a rule change by Congress in 1991, the FDIC is now required to use “the least costly transaction when dealing with a troubled bank. The FDIC won't reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund....As a result, uninsured depositors are protected only if a bank acquiring the failed bank will pay more for all of the deposits than it would for insured deposits only.” (MarketWatch)
Great. That's reassuring. And there's more, too. FDIC Chairman Shiela Bair warned that “as of Sept. 30, there were 65 institutions with assets of $18.5 billion on its list of "problem" institutions;” although she wouldn't give names.
So, what does it all mean?
It means there's going to be an unprecedented wave of bank closures in the US and that people who want to hold on to their life savings are going have to be extra vigilant as the situation continues to deteriorate. And it is deteriorating very quickly.
Right now, many of the country's largest investment banks are holding $500 billion in mortgage-backed securities and other structured investments that are steadily depreciating in value. As these assets wear-away the banks' capital, the likelihood of default becomes greater. This week, Fitch Ratings announced that it will (probably) cut ratings on the 5 main bond insurers (Ambac, MBIA, FGIC, CIFG,SCA) “regardless of their capital levels”. This seemingly innocuous statement has roiled markets and put Wall Street in a panic. If the bond insurers lose their AAA rating (on an estimated $2.4 trillion of bonds) then the banks could lose another $70 billion in downgraded assets. That would increase their losses from the credit crunch--which began in August 2007---to $200 billion with no end in sight. It would also impair their ability to issue loans to even credit worthy customers which will further dampen growth in the larger economy. Structured investments have been the banks' “cash cow” for nearly a decade, but, suddenly, the trend has shifted into reverse. Revenue streams have dried up and capital is being destroyed at an accelerating pace. The $2 trillion market for collateralized debt obligations (CDOs) is virtually frozen leaving horrendous debts that will have to be written-down leaving the banks' either deeply scarred or insolvent. It's a mess.
There were some interesting developments in a case involving Merrill Lynch last week which sheds a bit of light on the true “market value” of these complex debt-pools called CDOs. The Massachusetts Secretary of State has charged Merrill with “fraud and misrepresentation” for selling them a CDO that was "highly risky and esoteric" and "unsuitable for the City of Springfield.” (Most cities are required by law to only purchase Triple A rated bonds) The city of Springfield bought the CDO less than a year ago for $13.9 million. It is presently valued at $1.2 million---MORE THAN A 90% LOSS IN LESS THAN A YEAR.
Merrill has quietly settled out of court for the full amount and seems genuinely confused by the Massachusetts Secretary of State's apparent anger. A Merrill spokesman said blandly, “We are puzzled by this suit. We have been cooperating with the Secretary of State Galvin's office throughout this inquiry.”

Spin

Its a mess, even the ratings companies themselves are under scrutiny by the SEC for "waiting too long to cut ratings"

linky

bkkandrew

More bad news from the UK side of the pond:

Britain's battered banks pray for deliverance - Business Analysis & Features, Business - Independent.co.uk

Just glad trusty Nationwide is not on the hit list!

bkkandrew

German Bank about to go under:

AFX News Ltd. London : Financial News Products

IKB Deutsche Industriebank AG needs 2 bln eur in additional guarantees to cover risks from failed investments related to the US subprime market, a re-evaluation of its securities portfolio has shown, Frankfurter Allgemeine Sonntagszeitung (FAS) reported.

The total amount of IKB's financial risks now amounts to 11.5 bln eur, the newspaper said, citing capital market sources.

Neither IKB's shareholder KfW Bankengruppe nor IKB itself are able to cover for the new deficit, the report said.

A group of private-sector banks, which has already pledged almost 1 bln eur in guarantees to IKB is now being urged to provide an additional 2 bln eur in funds, but the group of banks has so far resisted the pressure, FAS said.

Meanwhile, Sueddeutsche Zeitung cited unnamed sources as saying that the German government, development bank KfW and several private-sector banks are working on a new package of financial guarantees for IKB.

The paper cited unnamed KfW supervisory board members as saying IKB faces further writedowns of 1.3-1.8 bln eur related to US mortgage backed securities.

Previous guarantees worth 5.3 bln eur that were given to IKB have already been all but exhausted, Sueddeutsche Zeitung said.

Story in German:

Faule US-Kredite: Weiteres Milliardenloch bei der IKB aufgetaucht - Wirtschaft - SPIEGEL ONLINE - Nachrichten

Anyone with an account with this bank should withdraw now IMO.

Texpat

Is the sky falling again?

Damnit. I really should nip out and pick up some of that sky-falling insurance, but not sure the insurers are any more solvent than the banks.

Need to find a basement.

bkkandrew

I guess for those with no money in the bank, you need not worry about the likely failure of said bank.

I do not fall into this catagory, I can only assume why you airily dismiss such matters...

Texpat

Actually, I don't have much money in banks. And my mutual funds and IRAs are steady on.

I airily dismiss such matters because you go out of your mind if you read the financial papers every day. I did for about two decades and finally got sick and tired of experts babbling on about why the markets are going down. Like Sabang said, there are natural cycles. Get used to it. Maybe someday the financial sky will actually fall, but until then, I'll remain airy.

The boy who cried wolf didn't get much attention after about the fifth false alarm.

bkkandrew

I am not quite sure of the point you are making, but to be clear, the reason why I started this thread is that those who live here and maybe are not in the loop of financial matters could be at risk of their savings being in a bank in danger of failure.

I have also simply quoted other sources, rather than making any dramatic comments myself. Whether you read them is up to you...

sabang

More carnage to come (believe me). Canny sabang will then start buying again.

Spin

Perhaps not for those retired and comfy in Isaan but for many the state of the economy is a serious matter to which livelihoods are attached. I wish I could be so blase about it but my trading dollar account tells me to believe the worst right now.

sabang

^ It's darkest before dawn spin. This volatility and cyclicality is a necessary adjunct of our financial system, due actually to the primal emotions of greed and fear. It was overdue, but thats normally the case.

It's easy for me to be sanguine I realise, but from your point of view a time is coming that will present a low risk buying opportunity that you likely only see every twenty years or so. Just wait a bit longer. Generally, the clarion call is when everyone is shouting 'Doom'.

__________________
Patriotism is the last refuge of a scoundrel.

bkkandrew

Well put. Trouble is that dark point seems some way off yet...

Butterfly

Most central banks have a built-in rescue system, it's called the window discount rate, basically a "special discount" rate for banks to "borrow" reserves from central banks,

That UK bank with the bank run a few months ago did exactly that,

Yes it's a disaster, and the news are quiet about it for good reasons, the last thing you need is a bank run as this would collapse the whole system, like it did in the 1920s