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Old 02-22-2009, 11:20 AM
 
Location: Castle Hills
1,129 posts, read 2,284,142 times
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Quote:
Originally Posted by HappyTexan View Post
The FDIC actually has up to 1 year to give you your money if you do some reading on their site.
This is not a new rule, but nevertheless a rule. Currently the FDIC closes a bank on Friday evening and customers are able to access their money in their new bank on Saturday.

Can you wait up to 1 year to get access to your bank account ? (worse scenario here)
Great point. Also, that is the current rule. They can change that quickly if they want and make it 2 years, 5 years, or whatever.
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Old 02-22-2009, 11:27 AM
 
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IDK why everyone thinks money will be worthless if these banks fail. Money will become worth more since it is being destroyed and there is less of it circulating. That's econ 101. The problem is, this will shock consumer confidence even more, and more money will be hoarded. More money hoarded = even less money circulating. That is what happened during the great depression.

Money will become truly worthless when you have a situation like in Iceland, which even then isn't what people on here are thinking of. If you want a situation where money is TRULY TRULY worthless, and people start rioting, and you want it on the level of the USA (1st world), look at Argentina. They were once comparable in GDP per capita as western Europe and the US. Then, years of bad monetary policy caused them to collapse. Capital started leaving the country en masse; investors left and what they had to back their currency was gone. So, the price of one Austral went down compared to other currencies (foreign currencies went UP in price in their own currency) by large amounts. So, what did the Banco Central de Argentina do? Printed more money to introduce to its citizens so they could afford the new high prices of foreign goods. But, what did that do? Those foreign currencies went up in price due to the new ratio of currencies, backed by little private capital in the country to begin with, to go higher (more Australs per other currencies). Also, at the LOCAL level, since there were more Australs people COULD by more. Since people COULD buy more with more Australs, this caused a shift upwards of demand. What happens when demand shifts upward in microeconomics? Price increases. When price increases after introducing more money supply to the people, you were really better off just not increasing the supply at all. But Argentina did this, and the price of goods soared. What happened when prices went up? They printed MORE money to compensate for higher prices. And, that cycle repeated many times, leading to 200% inflation rates month over month. Now, Argentinians couldn't import anything nor could they rely on stable prices in their own localites. They used funny money (credit and loans) to buy more goods while not making more goods to put into the system (sound familiar?). Banks collapsed by borrowing money, backed by no real capital in the country, from the central bank. They couldn't immediately pay it back because wages of depositors hadn't gone up immediately (it takes some time for that usually, though many I know who lived through this remember earning double their income month to month because of rapid inflation and companies getting more money from inflation).

At one point, people couldn't take money out of the bank. But those who did often times converted to the US dollar for its stability. They also requested to be paid in US dollars and put their money in US banks. Thus, the system collapsed and the currency collapsed due to its lack of stability and hyperinflation. The people lost faith and trust in the currency (which the latin "fiat" literally translates into English "faith" for good reason). This loss of faith caused the real collapse of the currency, and that loss of faith was caused by the perception that their Austral today would be worth less tomorrow (literally tomorrow, not just over time LOL).

We already had are hot inflationary period caused by giving out too much money w/ no production. Now, banks aren't giving it out anymore. The money supply is stagnating compared to the past 8 years while we are still producing (it's cutting down, but we're still producing more than the money supply is growing). That's why we're having deflation. People still have faith in the dollar. They know that they can go to the store and buy a Coke for $1.50, and tomorrow it will still be $1.50. There is still investment here, and people still have faith in our treasuries. The price of our currency is relatively stable compared to the other basket currencies. And, the mess we're in is global, so we're not the only one feeling the pinch (since we're going down and everyone else is as well, it doesn't look as bad in comparison, and in fact, Europe is worse off than we are yet you never hear people talk of thier 'collapse' in the immediate future). If BoA and Citi failed, and the FDIC couldn't back all those deposits immediately (or ever), the money supply would decrease. People would lose thier savings, retirement, etc. This would cause rapid deflation, which those with money would enjoy and spend, and businesses would still take the dollar in the immediate future. Since faith in the dollar would remain with those who have it and those who accept it, it would still have a worth. And, people still need goods and services for everyday life, so those who don't have it will do anything in their power to get it (even prostitution if they're desperate enough). They'd spend some on necessary goods (house, food, water, clothes) and save the rest (hoarding, no luxury goods). Less dollars circulating, but enough stability for faith in the dollar. Just like what happened during the Great Depression.

Again, not to say what happened in Argentina or "those countries" just CAN'T happen here (I get annoyed hearing people saying that, too), just that the current environment doesn't seem to call for it according to economic history.
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Old 02-22-2009, 11:34 AM
 
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Quote:
Great point. Also, that is the current rule. They can change that quickly if they want and make it 2 years, 5 years, or whatever.
Or, never even. They could just get rid of the FDIC if they wanted to.
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Old 02-22-2009, 11:42 AM
 
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If you ask me, if Citi and BoA failed perhaps in the realm of leverage requirements or stock requirements), they probably would be nationalized instead of the FDIC taking them over. The government might try to downplay it by saying it was a "precaution" as to not panic their customers. The scenario I painted above of BoA collapsing would be reason for the government to take over the bank, so you don't have rapid deflation and a depression.
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Old 02-22-2009, 12:29 PM
 
Location: Great State of Texas
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Remember though that these big banks are also investment banks and are big clearing banks for other banks. They are not JUST commercial banks for people so there is alot at stake if they go under.
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Old 02-22-2009, 02:31 PM
 
Location: Socialist Republik of Amerika
6,212 posts, read 11,450,616 times
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Quote:
Originally Posted by HappyTexan View Post
Remember though that these big banks are also investment banks and are big clearing banks for other banks. They are not JUST commercial banks for people so there is alot at stake if they go under.
Pensions, retirement, and investment will be vanquished in the blink of an eye, or stroke of a pen.
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Old 02-22-2009, 06:44 PM
 
Location: Castle Hills
1,129 posts, read 2,284,142 times
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Quote:
Originally Posted by freedom View Post
Pensions, retirement, and investment will be vanquished in the blink of an eye, or stroke of a pen.
Yup, and thats my fear. I don't think it will happen but with the economy in as bad of shape as it is, if I take no action now then I'm an idiot. I can't there is even talk of BOA & CITI failing. Thats enough for me to open my eyes and take action.

Also, I received a letter from BOA the other day saying they are very profitable and they made 4 billion dollars last year etc. They do not want to panic any of there customers because they fear a possible run on the bank etc. This letter was a red flag to me.
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Old 02-22-2009, 06:54 PM
 
Location: where you sip the tea of the breasts of the spinsters of Utica
8,305 posts, read 11,806,286 times
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Quote:
Originally Posted by HappyTexan View Post
Here's where you can check out any potential banks including credit unions:
Bankrate.com -- Safe & Sound (tm): Bankrate's free rating system for banks, thrifts, credit unions
Yeah, but there're running a bit behind events (sept 30, 2008).

Of the big banks, I'm considering shifting my BOA money to US Bank, or Wells Fargo. I've heard both are pretty stable right now. It's not absolutely necessary to move the money since it's below 250000, but who knows what can happen during the turmoil of a takeover.

It's best not put all eggs into one basket. Convert some money into junk silver coins or into physical gold. Put even more into preps for hard times, non-perishable foods and things like sleeping bags and coldweather clothes or other camping gear. Beef up your home security situation because it's inevitable that there is going to be more crime, including burglaries and home invasions.

These things are every bit as much "money" as the little electronic blips in your savings account.
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Old 02-22-2009, 07:13 PM
 
1,020 posts, read 2,208,544 times
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The worst part is, BoA was one of the most solvent companies during the downturn in September/October, but all of a sudden it bought that bad debt from ML and Countrywide and BOOM! Talks of nationalization. So, bank stability doesn't really give much confidence to people anymore.
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Old 02-22-2009, 07:16 PM
 
14,253 posts, read 14,736,031 times
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If you have cash and are worried about bank failures, you can always use it to pay down your mortgage (i.e. stash it in your house but in a way a thief cannot get at it). Then. if you need it back when/if the economy turns around, just re-mortgage.
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