Saturday, September 27, 2008

WooHoo!!

So it turns out that our bank - and the bank my company uses, too - has failed.WhooHoo!

But the FDIC has our back, right? This isn't 1929, we don't have to run down to the North Portland WaMu and get our money in cash to hide under the mattress or lose it, right?

WhooHoo!

But...what's backing up the FDIC..?

WhooHoo?

(Author's Note: I think one of the really open questions nobody is talking about is the potential effect of the massive consolidation of the banking industry occurring during this immense-public-failure-of-lassiz-faire-capitalist goat-rope. Now that WaMu is J.P. Morgan Chase and everyone else is Bank of America how close are we to having a monopolized banking system? What wil this mean for commercial and personal credit and finance? Will this make credit more difficult for struggling small businesses and individuals? To me the bottom line is: we don't fucking know. As John Travolta famously says in "Look Who's Taking: "Could be lunch meat! Could be peaches! Who knows?" But it COULD be one of the single most life-changing and long-lasting effects to result from the latest blowup of the "free" market system. And yet there has been little if any discussion of this in the Roman circus that is the "mainstream media".)

WhooHoo!

13 comments:

walternatives said...

That would scare me. It bothers me on your behalf, but it would definitely scare me. Right now, however, I prefer to spend the majority of my time with a dog. She has no interest to discuss current affairs.

Red Sand said...

May we live in interesting times, right? I can't seem to put away my anger at the system - those deposit protection mechanisms only work when it's a few isolated deposits that need to be protected. My biggest fear at the moment is the safety of our adoption savings.

Charles Gittings said...

Well curiously enough, my career started at BofA.

But that was when it was still very much A.P. Giannini's bank, not a brand-name taken over by a bank in N. Carolina.

A.P. was everything that our current business folks are not, and his great dream was to make BofA a truly nation-wide bank (Tansamerica Corp started out as the holding company for BofA), but I suspect he's spinning in his grave over this sorry mess.

pluto said...

I strongly recommend opening an account with a local conservative Credit Union. You'll get better rates, better service, and a little piece of mind in these crazy times.

mike said...

I have always been a credit union guy. But I don't believe they are immune from the economic cancer that is affecting our country.

Aren't they all under a Federal umbrella - even the local ons??? Who is going to guarantee the Fed's guarantees?

pluto said...

Mike -
I have always been a credit union guy. But I don't believe they are immune from the economic cancer that is affecting our country.

Aren't they all under a Federal umbrella - even the local ons??? Who is going to guarantee the Fed's guarantees?


You are right that credit unions as a category are not immune to the nation's ills. That is why I recommended a conservative Credit Union.

My Credit Union, for example, is a good outfit but there is a LOT of things that they don't offer (mortgages, for example) because they know that they don't have the sophistication to be competitive in the market. Net effect is that they are more likely to be safe than any other part of the financial sector in these troubled times.

What do you mean "aren't they all under the same Federal umbrella?" If you are asking about the FDIC bank insurance, then yes, they are. This is a little bit risky because the FDIC is running out of cash after bailing out IndyMac. Some experts have calculated that fixing WaMu will drain the FDIC down to the last quarter.

But that doesn't make any difference if the Feds don't have a reason to shut down your credit union.

pluto said...

FYI, turns out that WaMu didn't cost the FDIC a dime because they were able to sell it so quickly. Here's the article on the transaction:
http://calculatedrisk.blogspot.com/2008/09/fdic-wamu-closed-no-cost-to-insurance.html

mike said...

Pluto -

So, is there a report card for credit unions somewhere that grades them on the sanity of their loan policies??? I would love to check the ones that I have accounts with.

FDChief said...

I had thought about moving over to our local Portland Teacher's Credit Union, but they're now called something like "OnPoint" and are tarting themselves up to play with the Big Boys.

Meh.

And the article I linked to discussed the near-miss that WaMu almost sideswiped FDIC with. If JPMorganChase hadn't stepped in the FDIC would have been very nearly busted. And you wonder what sort of arm-twisting went on between the Fed and JPMC; WaMu failed because of the shitpile of bad loans on its books - the actual "bank" part of WaMu was pretty solvent. I can't believe that JPMC is getting anything like its investment back from the Whoohooers...

Interesting times, indeed.

srv said...

Mike,

Credit Unions are insured under the NCUA: http://www.ncua.gov/

You can read any credit unions financial reports there - but you need to be a bit of a banker to know what all those numbers mean.

Bauer Financial gives ratings, sitest like these:
http://www.creditunionstars.com/

Whether 5 Stars means anything more than AAA+ bonds, well, I'm sure we can trust the regulatory authorities to be on top of that...

basilbeast said...

heh

I have a Chase CC, does that mean all your banking is belongs to me?

Wa Moo HaHaHaHaHaHaHa!

;;;

pluto said...

Mike -
So, is there a report card for credit unions somewhere that grades them on the sanity of their loan policies??? I would love to check the ones that I have accounts with.

You don't really need one, just go explore their banking options. For example, do they offer mortgages? If so, do they offer an Option ARM?

If so, head for the next one, Option ARM's are too risky for most people and the Credit Union is playing with fire.

My Credit Union offers to connect you with insurance companies, financial advisers, and mortgage companies but don't offer the products themselves because they know they can't compete with the big boys.

The Chief's comment about "tarting themselves up" is exactly the problem that a lot of mid-sized Credit Unions get themselves into. They hit the wall in their niche and start trying all sorts of hair-brained schemes to get out of their niche. My Credit Union considered much the same sort of solution but decided it wasn't worth the risk.

SRV is right that the NCUA covers Credit Union deposits, not the FDIC.

P.S. - Check out Fabius Maximus if you really want to hear the latest on the current financial situation, the old Roman is really on target this time.

mike said...

Pluto and SRV -

Thanks for the good advice.

Turns out that my bride is the smart one in our family. Her IRAs and checking account is in a five-star credit union that does not offer any mortgages at all. My credit union unfortunately offers ARMs; time to change.