Posted: Fri Jul 18, 2008 12:04 pm Post subject: FDIC - freeze large dep. if a run occurs . . .
That's right folks.
There's a new method of preventing a run on a bank.
It's called - tell the big depositors to screw off if they smell trouble and they want their money out.
Wow. That sure makes me more comfortable.
This is a whole new step toward a completely government run country.
The best part is that they're saying that this is to maintain depositor confidence.
BuuuuuuuuYaaaaah!@!
Quote:
The new FDIC rules will require banks to standardize the information they provide on deposit accounts and to establish systems to automatically place holds on accounts with large deposits,
AllYourDepositsAreBelongToUs _________________ Massive Human Dieoff must occur as a result of Peak Oil. Many more than half will die. It will occur everywhere, including where you live. If you fail to recognize this, then your odds of living move toward the "going to die" group.
Posted: Fri Jul 18, 2008 12:40 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
From a reading of the article, I assume a "large deposit" is one which exceeds FDIC coverage.
This is only my interpretation based on the barest of facts mentioned in the article, but essentially uninsured depositors may have the ability to participate in a bank run formally removed.
One finding that came out of the Treasury Select Committee hearings into the Northern Rock collapse last autumn was that depositors whose accounts exceeded FSCS insurance thresholds had a rational reason to pull out their money and in doing so undermine the bank - which they could do as that group under the rules of the time accounted for a very large proportion of its deposit base. The Bank of England shared in this assessment. I saw a repeat of the live broadcast on TV. There was a clear admission that the insurance limits acted as an incentive to participate once rumours of the bank's condition spread and the run began.
Having learned this lesson, it was logical for the authorities to neutralise this incentive, and so insurance thresholds and levels were quickly reviewed and improved.
Perhaps in the US this was deemed insufficient.
The utility of the power as described would be to prevent this rational self-interest from being exercised in a crisis to its logical effect, thereby halting an exodus of funds that could by itself sink a bank. This is only my interpretation, but in essence the message seems to be "You must know the deposit insurance limits, and if you exceed them, your deposit can be treated as a point of vulnerability in a crisis and neutralised for the duration." If the crisis passes, all ends well and the money would be unfrozen, perhaps in stages. If it does not end well, the depositor would be held at fault for exceeding the limits. Either way, during a run, the large depositor's interests might not be allowed to come into conflict with those of the bank. _________________ "The American people are watching the numbers climb higher and higher at the pump and they're waiting to see what the Congress will do." - George W Bush
Posted: Fri Jul 18, 2008 12:55 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
What I wonder about is my employer's bank and how exactly that works. They have to have an account with over 100 K because if not then paychecks would bounce. I am not in a position to know but I wonder, are all of their accounts with the same bank that cuts my paycheck? What happens if that bank(s) go under?
How long until I get paid?
I have to confess, however, that I am already moving into inflation mode.
When I get some money I run out and buy something with it or pay off a bill with it.
Today I filled up the LP tank. this next winter will be the test for a new heating regime... but it is quite possible that this filled tank could last 2-3 winters (we heat primarily with wood) if not longer.
I will soon be cash poor but asset rich (in assets that I use on a daily basis).
Joined: Sep 25, 2004 Posts: 4543 Location: Boston, MA
Posted: Fri Jul 18, 2008 1:05 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
They should create another insurance program for deposits larger than $100,000 that is paid for by an extra fee on large accounts.
It wouldn't take much, maybe a small percentage of the interest earned on the account, and it would help protect the banking system from a run.
The extra insurance should be optional like life insurance but odds are it will end up mandatory. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Posted: Fri Jul 18, 2008 1:08 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
Folks, the Constitution was strongest on the day it was ratified. It's been getting weaker since then.
Just like that, your rights and liberty have been taken slowly.
It's better that way.
Everybody remembers the ferocious storm that changes the landscape, but few will even notice the steady rain that wears it away, bit by bit.
This rule is simply the precursor to something else. Set the tone. Get you used to it. Get the next gen used to it.
It's always the same way.
Like, for example, the Federal Government's taxation of your income.
Just a bit, at first. You know. 1% of salary of the top 10% of wage earners. Then it expands. Then it expands.
In the late 70s, the marginal tax rate was 95%. 95%. Even Marx was rolling over in the grave thinking, "boy, not that's a f--- job."
This is not about freezing this account or that account or this limit or that limit.
This is about stopping bank runs, which are now expected, by freezing bank accounts.
It's that simple.
What number will be "large"?
It's all relative people.
When they need to freeze YOUR account to stop the run, then frozen your account will be, be it 100 large or 5 dollars and cents 23. _________________ Massive Human Dieoff must occur as a result of Peak Oil. Many more than half will die. It will occur everywhere, including where you live. If you fail to recognize this, then your odds of living move toward the "going to die" group.
Posted: Fri Jul 18, 2008 1:36 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
Cashmere wrote:
It's called - tell the big depositors to screw off if they smell trouble and they want their money out.
as a small depositor, i like this solution.
we're talking about an emergency situation, or close to. admittedly brought on by mis-management. but, in the situation where they have to parse out the money in order to keep the doors open, it's better than giving preference to the large accounts.
i have a feeling that a run on one bank's deposits will inspire runs on other banks.
i think it's reasonable to expect some class-action lawsuits from depositors who lose money. i wonder if their lawyers will get real picky about what banks' checks they will accept up-front funds from. _________________ http://www.LASIK-Flap.com/ ~ Health Warning about LASIK Eye Surgery
Posted: Fri Jul 18, 2008 1:41 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
In case it gets updated out, the relevant passages are as follows:
Bloomberg wrote:
July 18 (Bloomberg) -- The Federal Deposit Insurance Corp. set a rule for banks to improve its ability to determine whether a customer's deposits are insured and speed up payouts in a bank failure.
The FDIC took over IndyMac Bancorp Inc., with $19 billion of deposits, July 11 after the bank failed to raise cash amid the worst housing crisis since the Great Depression. The collapse of the Pasadena, California-based bank threatens to spur withdrawals from banks ranging from First BanCorp in Puerto Rico to Los Angeles-based Nara Bancorp Inc. as customers trim accounts to below the $100,000 limit on deposit insurance, according to Sandler O'Neill & Partners LP.
Banks have 18 months to comply with the rules that go into effect on Aug. 18.
The policy covers checking, savings and money market accounts as well as certificates of deposit.
The new FDIC rules will require banks to standardize the information they provide on deposit accounts and to establish systems to automatically place holds on accounts with large deposits, the Wall Street Journal reported.
Posted: Fri Jul 18, 2008 2:10 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
pedalling_faster wrote:
as a small depositor, i like this solution.
i have a feeling that a run on one bank's deposits will inspire runs on other banks.
An emergency should not be used to justify theft, which is where this could be taken by less scrupulous authorities in future.
However, that is not my main concern.
While I accept that people exceeding deposit insurance are stupid, so are the banks that assume the continued existence of such funds when sailing their business close to the wind, or anywhere at all for that matter. Every individual should have the right to take their funds in excess of deposit insurance limits to another bank right now and at any moment in the future. This is a zero sum game, as whatever funds are withdrawn from one bank, are deposited in another, making that bank stronger! People should be encouraged to redistribute their savings more evenly and avoid the temptation of keeping everything in one more easily managed place.
A bank run does not constitute a special condition in this regard. Admittedly the bank in question would not benefit from the receipt of deposits from other banks and may become a casualty. But in such circumstances, interference of the sort apparently suggested, could have undesirable unforeseen consequences. For example, it could call into question the bank's integrity, deepening anxiety, giving the run fresh urgency, provoking hostility and instantly destroying the bank's goodwill, brand and viability as a going concern whether or not its financial condition proves fatal. Or worse, it could cause unsophisticated depositors to question the integrity of the entire FDIC scheme. The last thing people will hear is frozen accounts. Once you take that s*** out of the box, you cannot put it back. _________________ "The American people are watching the numbers climb higher and higher at the pump and they're waiting to see what the Congress will do." - George W Bush
Joined: Jun 13, 2007 Posts: 3637 Location: Minniesotuh
Posted: Fri Jul 18, 2008 2:17 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
Tyler_JC wrote:
What qualifies as a large deposit? I'm tempted to say "screw this" and move whatever cash I have out of the country. I wonder if I can set up an account through that friend of ours in Zurich...
I don't know, Tyler. Might not be a good idea:
Swiss bank secrecy under scanner again
It also might not just be the US and Europeans putting pressure on Swiss banks to divulge client names and to help foreign investigations
Swiss bank secrecy is under uncomfortable scrutiny again. A US Senate report goes after UBS AG and LGT Bank of Liechtenstein for helping customers to conceal money in offshore tax shelters. But the real targets appear to be the governments themselves, Switzerland in particular.
The congressional investigators estimate offshore tax evasion costs the US $100 billion (Rs4.28 trillion) a year. Probes by the US justice department and the internal revenue service into UBS’ practices are also gathering pace. …
The din could prove intolerable this time as well. One of the sponsors of the tough US anti-tax-haven legislation is Barack Obama. Before long, he may be hard to ignore.
Where do you think you are going with Our Money? _________________ "RRrrruuuunnnn!!!" ~Apocalypto
Posted: Fri Jul 18, 2008 2:21 pm Post subject: Re: FDIC - freeze large dep. if a run occurs . . .
So if I need to withdraw a large amount of money to get my mother an operation, but the bank needs the money to stay open, the bank gets priority?
If I need cash to bail my brother out of jail, but the bank needs the money to pay the dumpster service bill, my brother is out of luck?
I need money to pay the mortgage or another bank will take my house, but the bank has to hold on to my money just in case someone else wants to make a withdrawal?
SCREW THAT!
The size of my checking account will be sufficient to cash checks and pay a few bills. I'll secure the cash elsewhere. Lost interest is negligible. _________________ If you want a picture of the future, imagine a boot stamping on a human face--for ever."
-George Orwell, 1984
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