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Posted by on July 28, 2008, 4:00 pm
With the failure of two independent banks on Friday, I am
concerned about an account that my mother in an independent
bank. It is over the $100K FDIC limit.
My plan is to split the account into two and move them to
two "safe" banks. The question is: which banks are "safe"?
Of course, no one knows for sure. But my suspicion is that
small independent banks are more likely to fail than large
nationwide banks.
On the other hand, one might argue that large nationwide
banks might be at greater risk due to their higher potential
volume of subprime mortgages and other risky lending
practices.
Whadaya think? Does anyone know the names of some
large nationwide banks that pundits have said are at risk?
More importantly, where can I go to get credible advice on
the subject? Or is there simply no one whose advice can
be trusted, and we are left to follow our own hunches?
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Posted by Sgt.Sausage on July 28, 2008, 5:29 pm
No bank is "safe" -- they are *all* at risk (for sufficient
values of "risk").
Some are safe-er than others, but none are truly safe. Any
bank can fail at any time for a large number of various
reasons.
> Of course, no one knows for sure. But my suspicion is that
> small independent banks are more likely to fail than large
> nationwide banks.
I wouldn't bet on that. A lot of the smaller independent
banks, just due to their smaller nature and other limiting
factors, were a helluva lot more cautious in what types of
folks they'd extend credit to. A lot of my local banks only
do commercial -- won't touch residential -- and only then to
the top-tier of borrowers. They're *extremely* careful with
what they loan out, and have been throughout the entire
ridiculousness of the recent CrazyLoanFrenzy(tm).
> On the other hand, one might argue that large nationwide
> banks might be at greater risk due to their higher potential
> volume of subprime mortgages and other risky lending
> practices.
Now ya got it!
.
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Posted by John A. Weeks III on July 28, 2008, 8:14 pm
>
> No bank is "safe" -- they are *all* at risk (for sufficient
> values of "risk").
>
> Some are safe-er than others, but none are truly safe. Any
> bank can fail at any time for a large number of various
> reasons.
At the same time, you have to look at the risk of the options.
Putting it under your mattress opens you up to home invasion,
theft, loss by fire, etc. You also don't earn any return if
you burry the money in your back yard, so you are losing buying
power.
I don't think that the risk of loss due to a bank failure is
that much to worry about, especially when compared to the risk
of non-bank options.
If the OP is nervous, then they should spread their money
around to several different banks. That way, if one has an
issue, you are not stuck without access to cash while that
one back sorts things out (or the FDIC sorts it out).
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
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Posted by Daniel T. on July 28, 2008, 10:29 pm
> If the OP is nervous, then they should spread their money
> around to several different banks.
Mitigate risk by diversifying... Isn't that the basic risk mitigation
technique?
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Posted by Douglas Johnson on July 28, 2008, 9:37 pm
>
>
>No bank is "safe" -- they are *all* at risk (for sufficient
>values of "risk").
>
>Some are safe-er than others, but none are truly safe. Any
>bank can fail at any time for a large number of various
>reasons.
True, but if your deposits are below the FDIC limits, you don't really care. The
Feds close the old bank on Friday, open the new bank on Monday. The only
difference is the sign over the door. As I mentioned earlier, I had it happen
three times on my checking account.
>I wouldn't bet on that. A lot of the smaller independent
>banks, just due to their smaller nature and other limiting
>factors, were a helluva lot more cautious in what types of
>folks they'd extend credit to. A lot of my local banks only
>do commercial -- won't touch residential -- and only then to
>the top-tier of borrowers. They're *extremely* careful with
>what they loan out, and have been throughout the entire
>ridiculousness of the recent CrazyLoanFrenzy(tm).
Right. Many local banks can't even spell "CDO". That's a good thing.
-- Doug
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