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The Alchemist (02/13/2008)
By Al Thomas


Do you know what FDIC stands for? Most people don't. You are

not alone.

It is important because the Federal Deposit Insurance Corporation is the one that guarantees your money in the (hopefully) unlikely event your bank might go out of business.

Ten years ago the amount of the guarantee was only $10,000.

Today it is $100,000. What worries many about this very high amount is does the FDIC have enough money to pay everyone if that awful calamity should occur? Well, don't worry Uncle Sam can turn the printing presses up another notch so everyone will be paid. Of course, it might take a year to get your money, but at least you will get it.

In January the FDIC said they were going to do an "update" on the protection of customer savings accounts at many banks. They said they were going to investigate 65 large banks that had assets of more than 18 Billion. (Yes, that's a B). They did not say what or how they were going to do, but these 65 banks were cited as "problem institutions". They also did not clarify what the problems might be. Usually this type of "problem" refers to capitalization requirements.

Banks should have at least 10% in reserves to pay off any customer(s) who present a demand for their money. Below 8% is considered undercapitalized and under 6% is significantly undercapitalized. Red flags go up and bank examiners show up (I hope).

The FDIC can come in to take over control of the bank and remove present management.

Every bank pays a premium to the FDIC for this insurance. Part of the money is supposed to be set aside to create a reserve in the event of any bank failure. Let's hope this "reserve" is not like the Social Security Trust Fund which is spent every year by the Washington politicians. There Is no Social Security Trust Fund Is your bank on the hit list? You can ask your bank manager, but it is doubtful he will know. That will be in the far reaches of big corporate headquarters. Will a call there get the answer? Doubtful. Try the FDIC to see what kind of run around is gotten. Maybe an inquiry through the Freedom of Information Act might do it, but how long will that take?

As usual the little guy will be pushed around by the bureaucrats.

They don't want him to know what a poor job they are doing.

Don't be "snowed" when your banker tells you they have billions in deposits and not to worry. It is some of the largest banks that are having the worst problems. About the only action a small investor can take is to spread his money into more than one bank - maybe 3 or 4 depending how much he might have.

No matter how small a savings account a person might have it would be a good idea to separate it into more than one bank.



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