Busted: Bankers and The Global Economy

July 17, 2008

IndyMac, FDIC Guarantees and Brokered Deposits

The FBI has been on the trail of the subprime mortgage debacle since February of 2007, whether you have heard about that truth or not. They have been ferreting behind the scenes to find the fraud that has tainted the lives of Americans and the global economy. IndyMac is the latest big chunk of fraud that is under investigation, even as the bank folded last week. The FBI is currently examining 21 corporate targets for fraud, IndyMac being one of them. Otherwise, the FBI and the FDIC are keeping details hushed.

Surely, you know the game by now. Denials of trouble are ALWAYS the mainstay of any public inquiry. When an inquiry regarding any trouble is made into any financial institution, it is always denied or significantly downplayed. In the case of Countrywide’s bank buddy, IndyMac, the denial was made on July 1st. The Feds have done no less for Freddie Mac and Fannie Mae, perhaps the most poorly-named institutions on the planet.

The reality in the IndyMac case was that depositors had been pulling out their money, often in amounts over the $100,000 FDIC guarantee, for the last few weeks. American depositors that don’t manage their deposits properly don’t want to have their money tied up and promptly run to the bank to pull their money. Strangely, the illusion of having money tied up only applies to amounts in excess of $100,000. The reality is that closed banks always reopen with standard accounts and guaranteed funds fully intact. That is the beauty of the FDIC government guarantee.

Clearly, we have lots of Americans that are putting their eggs in one basket. This is no-win situation for any depositor. If you have more than $100,000 in any one institution, you are begging for trouble. The bank runs, it would seem are being caused or at least largely enhanced, by depositors that lazily deposit funds in chunks of cash over the FDIC guarantee. This is simply bad money management.

Investing in third-party brokered certificates of deposit is another area where depositors must watch their money. Brokered certificates can use virtually any bank for a depository. As a depositor-investor, you must know which bank your deposits are going into if your cash net-worth is running close or over $100,000. That way, in the event of banking collapse, you actually have the opportunity to keep control of your money without the temptation to panic or the necessity of running to the bank to pull your money.

The reality is that dealing with your money requires only simple management. The Federal Government of the United States has made it easy for you as long as you aren’t lazy. If you track where your money is deposited in FDIC institutions, you won’t lose a single greenback or control of your money for any significant period of time. That is the beauty of the system designed by the U.S. government. Use the system to your advantage instead of running to the bank because you have failed to properly manage your deposits. Don’t fool yourself into thinking you are too busy.


1 Comment

  1. What is the status of the sale of assets by Indymac FDIC? How should the uninsured loss be handled for IRS purposes?
    Thank you, Richard

    Comment by richard — October 27, 2008 @ 5:37 pm

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