Busted: Bankers and The Global Economy

August 4, 2008

U.S.: What Banking Fraud Means to Depositors

There have been a number of bank failures and the recent accumulation is increasing in pace. The FDIC sees many bank failures down the road. If you are uncertain why banks should fail, you are at the right place. “Busted: Bankers” highlights corruption and fraud in the global banking industry without the restrictions of mainstream media and politics.

The public word is that regulators are bracing for 100-200 bank failures over the next 12-24 months. If the FDIC is anywhere near right, the United States has what could be considered to be an alarming increase in the number of U.S. commercial bank failures. This debacle, despite props from the Federal Reserve, has been caused by creative banking instruments and outright fraudulent activities in the name of profits for bankers and investors. The resulting contraction of the housing market and credit squeeze on a global basis are of their making, a hefty portion at taxpayer expense.

FDIC insurance is the ultimate standard for protecting the assets of banking depositors in the United States. The FDIC has raised their mandatory banking insurance rates to cover the expected expense of bailout. The government claims that the FDIC has ample resources. While this reality is debatable if several shoes drop at once, the U.S. federal government backs the FDIC. Deposits that meet requirements under the $100,000 account limit are fully protected, as good as the government that backs them.

How do you protect your money and keep that money in a safe bank? To begin, always look for the FDIC logo at your bank branch. If you are using online services or a bank, look for the logo as well. However, don’t assume that the FDIC label is accurate in the name of safety and healthy skepticism.

Simply go to the fdic.gov and locate “bank find“. In this way, you can be certain that the bank that you selected is FDIC insured. The FDIC also has a list of bank rating agencies on its Web site that can evaluate the financial stability of a bank. To get a free evaluation, check out bankrate.com, remembering where your loyalty lies. Banking information is generally set up to secure confidence. The information you are given is designed to that end. However, regardless of bank strength, FDIC insurance will secure compliant deposits. That is what you really need to know about.

As an individual, personal deposits are insured up to $100,000 in an FDIC-insured institution, including savings, checking, certificates of deposit and money market accounts. This assumes that your accounts are non-brokered. When you register with the bank directly, make sure that your deposits are non-brokered and will reside with the institution instead of being handled by a third-party. This will ensure your financial safety.

While banking fraud has meant plenty as far as creating a troubled economy, as a depositor, you are fully protected with FDIC insurance. The protection is as good as the government protection that is trusted in, which in essence, comes straight out of taxpayer pockets. Bank runs and panic aren’t a necessary part of your reactions.

In the meantime, investing and spending with a certain amount of prudence is importance. If you are involved in large financial transactions, plan ahead without waiting until the last moment. Some depositors with IndyMac put off dealing with large transactions until the last moment, putting a financial kink in meeting their obligations. The problems could have been prevented by securing a cashier’s check a few days ahead instead of at the last minute. A good rule of thumb is to avoid putting off anything that you can do today, especially where your financial life is concerned. ~ E. Manning

July 26, 2008

More U.S. Banks Close Amid Pain

Friday at the last moment seems to be an FDIC favorite process for dealing with bankrupt financial and banking institutions. The Federal Reserve filed an order for First National Holding Company of Scottsdale, Arizona to cease and desist their actions, while providing certain documentation to the Federal Reserve Board.

The FDIC closed First National Bank of Nevada and First Heritage Bank. The FDIC moved quickly before the situation at the banks became worse, stating that the takeover of the failed banks was the least costly resolution and all depositors, including those with funds in excess of FDIC insurance limits, will switch to Mutual of Omaha with “the full amount of their deposits.” The FDIC has made certain that account holders have full access to their funds with the ability to write checks and make ATM transactions.

Local authorities have warned against the “need” for a bank run as (more…)

May 31, 2008

Does FDIC Cover Brokered Deposits?

In today’s banking industry, looking carefully before you leap is an important part of any decision-making process, especially where your money is involved. You might assume that any deposit that you make in a United States banking institution is FDIC insured. Nothing could be further from the truth! Assuming that the FDIC is automatically going to cover your loss when investing in banking instruments could prove to be a mistake. In any event, brokering a deposit in a failed bank is likely to result in a loss of access to your money.

Putting money into an FDIC-insured certificate of deposit called a brokered CD could seem like a no-brainer in the cash department. Some consumer investors have discovered hurdles with so-called brokered CDs issued through one distressed Arkansas bank. The third bank closed by the FDIC this year on May was ANB Financial in Bentonville, Arkansas.

ANB has been the largest U.S. bank closed so far this year. Pulaski Bank and Trust Co. in Little Rock assumed control of the bank’s locations and deposits were quickly insured. ANB Financial had a large amount of brokered deposits in the neighborhood of $1.6 billion. These brokered deposits were not part of the FDIC deal. Why?

Brokered CDs are not the same as an ordinary CD (certificate of deposit) opened directly through a local or out-of-state bank. Brokerage firms offer CDs, too. The deposit brokers often negotiate (more…)

February 15, 2008

Auction Preserves Financial Markets

Filed under: banking, central bank, federal reserve, government, investment, money — Tags: , , , , , , , , — digitaleconomy @ 12:03 pm

In today’s speech at a capital markets conference, Frederic Mishkin openly admitted recessionary pressure in the financial markets since last summer. He also avoided the “r” word. The Fed is notoriously slow at admitting anything negative and the Governor’s speech is no exception. He admitted that liquidity in bank funding deteriorated substantially last year.

To address these pressures, the Federal Reserve introduced a new policy tool called the Term Auction Facility (TAF). With this tool, the Federal Reserve auctions a pre-announced quantity of credit to eligible borrowers for a term substantially longer than overnight.” Each auction has involved a term of one month. He finally admits that banks that participate are required to be in generally sound financial condition. Collateral for the loan is required. While this is not surprising, it is good to hear confirmation that attempts at sound judgment are being exercised despite the hysteria of the U.S. government.

Thus far, the TAF appears to have been largely free of the stigma associated with borrowing at the discount window, as indicated by the large number of bidders and the total value of bids submitted.” This is an accurate comment. However, the fact of the matter is that the Fed holds the bidding process and the information as confidential. By the admission of the Fed, this provision is what is stabilizing the U.S. banking economy. All of this is provided to prevent ongoing financial disruptions in the banking and finance marketplace.

I advise the little guy to continue to watch his/her deposits and investments very carefully. The industry is thinking of itself and outside perception. You would be advised not lull yourself into a false sense of security regarding your monies and investments.

February 4, 2008

January 22, 2008

Lawsuit: Overdraft fees ‘core’ to Banking

Filed under: banking, federal reserve, government, money — Tags: , , , , , , , , , , , , — digitaleconomy @ 10:10 am

“Laurence Rabinowitz QC was defending the Royal Bank of Scotland, one of eight lenders accused of levying unfair overdraft charges. Mr Rabinowitz said overdraft facilities are a “core” feature of accounts and therefore consumer law does not apply.”

Unauthorized fees have been the bane to citizen consumers for a long time. It’s nice to see the British are having a look at the way business is done. Interestingly, the bankers consider overdraft fees as a valuable core service. How? (more…)

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