Credit Crisis Safety Plays: Three Steps to Take to Make Sure Your Bank is Safe
[The second installment in an ongoing series detailing strategies that investors can use to insulate themselves and their finances from the ongoing credit crisis.]
By Keith Fitz-Gerald
Investment Director
Money Morning/The Money Map Report
Seeing banks such as Wachovia Corp. (WB) get sold or Washington Mutual Inc. (WM) fail is scary for retail banking customers. But there are simple steps you can take to protect your bank assets.
A Money Morning reader recently wrote to say:
“I’m panicked. After watching the news and several banks fail, how can I know if my bank is safe? I’m retired and can’t afford to ‘lose it all’.”
With about 120 banks on the Federal Deposit Insurance Corp.’s troubled list and rumors swirling that as many as 200 more are in deep kimchee, we don’t blame you for asking – particularly since the FDIC doesn’t publish the names of the banks on its watchlist.
Credit Crisis Safety Plays
Here are three quick and easy steps you can take that may help you determine if your bank is safe or not.
- Click over to Bankrate.com’s Safe & Sound ratings page. There you can plug in your bank’s name and see how it scores on the basis of 22 objective measures designed to gauge the capital adequacy, asset quality, profitability and liquidity of thousands of banks. If your bank doesn’t make the cut with a higher rating, then switch to one that does.
- Use the FDIC’s electronic deposit insurance estimator to see if your assets are covered in full. With the recent signing of the bailout legislation into law, the FDIC now covers accounts up to $250,000 at any one bank in any single account or $250,000 per co-owner for joint accounts. Traditional and Roth IRAs, SEPS and other retirement accounts on deposit at an FDIC-insured bank or savings institutions are insured up to $250,000 separately from any other deposits you may have at the same institution. But this is mainly deposit accounts and doesn’t include stocks, bonds, mutual funds or life insurance policies.
- Double-check your ownership. If a portion of your assets is uninsured, getting full coverage may just be a matter of changing ownership or spreading out your accounts to different banks. (But keep in mind, like most things the government doesn’t make this easy so that means more paperwork.) If you’ve got the big bucks, visit the Certificate of Deposit Account Registry Service, or CDARS, and learn how you can obtain full FDIC insurance on deposits up to $50 million – with a single interest rate on a single statement at a single bank. Ironically, a former U.S. Federal Reserve employee – someone who must have gotten “fed” up with the complicated FDIC insurance requirements and ownership restrictions – started this innovative service.
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But what ever you do, do it quickly.
That way you won’t be one of hundreds who will probably be camped out at the front doors of the next IndyMac Bancorp Inc. (OTC: IDMC) when it hits.
[Editor’s Note: “Credit Crisis Safety Plays” is a new Money Morning series that will detail strategies that investors can use to insulate themselves and their finances from the ongoing credit crisis. The first installment explained how to make sure your bank deposits are FDIC insured. These personal finance missives will draw upon the experiences of such experts as Money Morning Investment Director Keith Fitz-Gerald.]
News and Related Story Links:
- Money Morning:
Credit Crisis Safety Plays: How to Make Sure That Your Bank Deposits are FDIC Insured - Money Morning:
Banking Bailout Becomes Law With House Vote, Bush Signing - Bankrate.com:
Safe & Sound rating - FDIC:
Electronic deposit insurance estimator - Website:
Certificate of Deposit Account Registry Service
Comment by Rick R. Pelley on 6 October 2008:
Once again, sound admonition from Keith Fitz-Gerald whose sensitive “intelligence fingers” monitor the “financial pulse” of the world, and more particularly, that of the dying “patient” he finds immediately at his feet, home in the US. Like all his collogues at Money Morning, he “knows” his stuff.
I feel this way, because I have been reading their material for a couple of years, now.
Nevertheless, these are “unprecedented” times in which we live, so that even the “best” among us can be perplexed and shaken. Unfettered, traditional standards of analyses, therefore, have all but disappeared.
Deep down, however, those aware and on the watch, notwithstanding good (tried and true) financial advice, know full well the futility of the world’s “numbers” valuation regime.
They know that money is “broken” and that it cannot be “fixed”.
People need to realize the depth of their “amnesia”, therefore, and the need to shift focus away from money’s expiring “artificial” security, to that of a “new” paradigm of human exchange.
We are right on the “cusp” of big change, and do well to inquire about that, instead.
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