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Protect Your Assets

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July 30, 2008 – Comments (8)

This is probably about my 10th or 20th time saying, but it bears repeating, make sure you do not have more money then what is insured in any financial institution, and even if you have practially nothing, it would be wise to have assets split between two banks just so you have access to some funds should there be a problem.

Financial Armageddon has a link about two people caught in the IndyMac failure.

The woman who made the request to move money the day before the collapse doesn't get a lot of sympathy from me because by the time you are getting a strong signal you need to be out of there it is likely too late, or you will be in line trying to justify why you should get back yours with all the others making the same kind of claims.  I suppose that is harsh, but I've been warning against this kind of thing for a year now.

I think it was April 2007 that I realized there would be banks runs and bank failures and that is when I started making plans to make sure I was covered.  My experience with transferring my funds was highly, highly, highly stressful.  By law when you make a request they have 5 days to comply.  After a month and 3 requests from my bank and a letter from me promising to report them to the securities commission if they did not immediately comply there was still no transfer.  I did end up reporting them to the securities commission and my money wasn't transferred until after they were contacted by the securites commission, about 7 weeks in total.  When you expect a rash of bank failures like I did, well, I found this highly stressful and I question if it was an under handed way to hang onto capital.  They are still there and perhaps this was just gross incompetence on their part, but the point is that when you want to move it might not go smoothly or quickly.

Protect your assets.

8 Comments – Post Your Own

#1) On July 30, 2008 at 10:49 AM, AnomaLee (28.60) wrote:

dwot, what do you think about this??

I really really want to know your thoughts on this...


A Safe Stash for Big Cash (Yahoo! News)
The service splits big deposits into chunks of just under $100,000 and spreads the money across a network of over 2,000 banks-one quarter of the entire industry. That way, large amounts can qualify for full insurance coverage, according to the Federal Deposit Insurance Corp., the government agency that oversees the insurance program. Only banks with the FDIC's highest "well-capitalized" rating can participate.

Customers choose a bank in the network (listed at www.cdars.com) as their "home base." They can choose between CD maturities ranging from four weeks to five years. A single rate of interest set by the home bank applies to the entire portfolio, and customers get one statement from their home bank that lists each holding. There's no fee for customers to participate, but Arlington (Va.) Promontory Interfinancial Network, which runs CDARS, charges banks an initiation fee to join the service as well as a fee of up to one-eighth of a percentage point on transactions.

The concept is the brainchild of three financial heavyweights. Co-founder Eugene Ludwig was the comptroller of the currency, a top banking regulator, from 1993 to 1998. Alan Blinder was vice-chairman of the board of governors of the Federal Reserve under Alan Greenspan from 1994 to 1996 ( and a former BusinessWeek columnist). And Mark Jacobsen was chief of staff at the FDIC in 1999 and 2000.

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#2) On July 30, 2008 at 11:14 AM, dwot (55.00) wrote:

I have a fairly wealthy friend that I have chatted with.  For the majority of us we can open as many accounts as we need to be under the insured amount.  I think once your wealth gets into the millions that becomes increasingly difficult.  If you have 10 million, well, that's 100 banks...

His comment was that you can only open so many bank accounts, which I tend to agree with.  Well, there's a business to cater to the wealth, providing services for them to open accounts in many banks...

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#3) On July 30, 2008 at 2:34 PM, GS751 (27.44) wrote:

I remember we've talked about this.  Thanks for reading my blog on NXTM.

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#4) On July 30, 2008 at 3:46 PM, TMFCHarris (99.59) wrote:

Really, if you have 10M in cash, I kind of wonder why you are having a hard time finding a place to put it. At that level, how much liquidity do you really need?

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#5) On July 30, 2008 at 11:19 PM, jester112358 (28.81) wrote:

With that kind of money why not just buy inflation protected (Ha  Ha!) t-bills.  Then you have the full trust and faith of the the American government in back of you (another good one).

Of course, in the event of a true run-on-the-bank, remember, your money isn't being "stored" anywhere, its invested in other people's overleveraged, overvalued real estate!  (Remember, Jimmy Stewart in "its a wonderful life"?  "your money isn't here, its in his home and her home etc.")   In fact, FDIC only has about 50B$ to cover about 7T$ of deposits.  So, the 2.6T$ of uninsured deposits are the least of our problems if there really is a panic-so everyone please stay calm or we will have a financial collapse.  Repeat aftter me:  I do believe, I do believe everything is fine. 

 I'd rather invest in short term corporate debt for  safety.  So, well managed money market funds that invest in this debt are likely safer than banks. The chance of a POT, CHK or MOS or any energy company defaulting is probably less than the US government!  After all they have real enormous assets that we can't do without.   What exactly does the US government have backing its debt?  (Oh, taxpayers)

 

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#6) On July 30, 2008 at 11:43 PM, jester112358 (28.81) wrote:

With that kind of money why not just buy inflation protected (Ha  Ha!) t-bills.  Then you have the full trust and faith of the the American government in back of you (another good one).

Of course, in the event of a true run-on-the-bank, remember, your money isn't being "stored" anywhere, its invested in other people's overleveraged, overvalued real estate!  (Remember, Jimmy Stewart in "its a wonderful life"?  "your money isn't here, its in his home and her home etc.")   In fact, FDIC only has about 50B$ to cover about 7T$ of deposits.  So, the 2.6T$ of uninsured deposits are the least of our problems if there really is a panic-so everyone please stay calm or we will have a financial collapse.  Repeat aftter me:  I do believe, I do believe everything is fine. 

 I'd rather invest in short term corporate debt for  safety.  So, well managed money market funds that invest in this debt are likely safer than banks. The chance of a POT, CHK or MOS or any energy company defaulting is probably less than the US government!  After all they have real enormous assets that we can't do without.   What exactly does the US government have backing its debt?  (Oh, taxpayers)

 

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#7) On July 31, 2008 at 12:27 AM, AnomaLee (28.60) wrote:

jester, what is wrong with your rantings?

Three years ago the FDIC had less money and no one was worried, and despite the ridiculous den of bears around here I will be the reasonable guy in the middle telling you there won't be a systemic run on the banks. Today, banking is based on electronic systems and not vaults of cash. Do you think a portion of the population greater than 10% (30 million) are going to withdraw their holdings and use Western Union to electronicaly transfer money? Unlike the 1930's, modern banking is convenient and will aide to prevent people from withdrawing and hoarding cash under their mattress. Do I need to mention the actions of the Federal Reserve?

Banks are failing because they are undercapitalized primarily because of losses in leveraged investment activity. This will continue to happen as bad bets continue to fail, but they are not undercapitalized because of massive withdrawals.

I don't want to hear about Bear Stearns. If your credit is similar to kindergarteners playing musical chairs then you were undercapitalized because of investment activity.

Our history has shown that we usually refinance and destroy massive obligations to public to honor obligations to foreigners. This could very easily be done today if we reduced entitlements substantially. We've done this several times over the decades, but eventually there are times such as the collapse of the Bretton-Woods agreement where we fail to honor obligations to foreigners.

Either could occur, but you know what? WHO CARES!!!!

Life goes on... There is more to it than money because an economy is based on the volume of goods not the volume of dollars. You're crying over the default of the financial economy. And, for what? Didn't Russia default in the late 90's and 10 years later their financial economy has emerged and they have survived. Didn't the same thing occur during the Asian Financial Crisis? How many nations have re-emerged with different currencies in the last century?

We are the largest debtor to the world... Do you think the world wants to witness a total U.S collapse, close their borders and trade and revert back to pre-modern lifestyles?

The answer is no. Compare how you would behave if you lent someone $100 and if you took out a mortgage to lend someone $100,000

jester, I wonder about you being too cynical to see this behavior occuring right in front of you because you're too busy fishing for salmon?

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#8) On July 31, 2008 at 9:17 AM, dwot (55.00) wrote:

THFHarris...  And if you have say half a billion?  Where do you put it?

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