With the Secretary of the Treasury, and the Federal Reserve Chairman, testifying before Congress, recently, that banks in the system, and investment companies, should be allowed to fail. Then a day or so later, Indymac Bank, in Pasadena, California, one of the largest banks, to fail in the U.S., closed its doors, due to liquidity problems, because there was a run on the bank. Which some speculate, was caused by Senator Chuck Schumer of New York, sending a letter, in which he described his concern over the financial condition of Indymac, to the regulators. It appears that anyone who is lucky enough to have over one hundred thousand dollars, in any one bank which is insured by FDIC, had better start taking their excess cash, over one hundred thousand out of their bank slowly, and move it to other banks. You are insured up to one hundred thousand dollars, over that, if a bank closes, you will only receive 50% of the excess of the one hundred thousand dollars, eventually. If it is an IRA, it is insured up to two hundred and fifty thousand. So a word to the wise should be sufficient.
The FDIC is sufficently captialized, it is reported, but a great many of the banks in the U.S. and around the world, due to the sub-prime mortgage crisis, are basically insolvent. There is a FDIC watch list in the U.S. of about ninety banks, mostly regional and small,
but there are many more, which are having problems keeping afloat. Fannie Mae and Freddie Mac, two of the largest mortgage insurers, are having their problems as well. But the Federal Government has announced, that they will do everything it takes, to keep the two companies solvent, and able to fulfill the purpose they were established to do.
So don't be caught flat footed, and look around and you have lost a portion of you savings, because you were not diligent. These are troubled times, and you must be aware of the problems, which are going to take a long time to be fixed. For one thing, when the Indymac Bank was closed that Friday, it did reopen the following Monday, with the Fed in charge, but any money over one hundred thousand dollars, at that point in time would not be accessible, to be withdrawn from the bank, until the bank is sold, and only a percentage of the excess, would be available to you, after the dust settles. So be aware. Move your money around if neccessary, and keep it under the insured level at any one bank.