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The Farmer File: Facts about the bank brouhaha
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A lot of people with money in local banks are going in to ask about their money.
Several bank managers on Marco Island, speaking not for attribution, paint a picture of worried savers, afraid of the stock market and queasy about banks now too.
Many well-heeled people keep big bucks in CDs and money market funds, in the millions for some investors.
Some now are frowning all the way to the bank, asking nervously whether all their money is safe.
Why? Because they consider Wall Street investments too volatile. They have money and they want to keep it, accepting modest returns for safety. So they sock it away in a bank insured by FDIC, the Federal Deposit Insurance Corporation, collect their low to middle single-digit interest rates and relax.
Or they used to relax, until the headlines began yelping about some banks stuck with way too many bad mortgages, including sub-prime loans.
Bankers say the media often exaggerate the problem and sometimes are wrong about customers’ recourse. No wonder people who had eschewed the stock market now worry about how the banks will withstand the storm.
“Customers are walking in and asking about their accounts,” says one Marco branch manager. “They hear all kinds of stuff and don’t know what to believe. Some media people have said that people are limited to $100,000 in funds insured by FDIC.”
One banker here told me several customers strode in and said, “I think I have too much money in this bank.” Maybe, but maybe not.
Some account holders here believe that if they have more than $100,000 in one bank, they should move anything above that amount to another bank.
”It’s just not true,” says a local bank boss. “With virtually any bank, the customer can create multiple accounts with different titles and each would be insured up to $100,000. It’s perfectly legal and above board. If they don’t believe us, they can check the FDIC Web site, www.fdic.gov/banks, and see for themselves. And we have booklets at the bank that explain all that.”
So, you don’t have to have money in a bunch of different banks if you’d rather not. Some people with a lot of cash want to spread it around, to guard against this or that bank getting into financial trouble.
Nothing wrong with that. But for those who have a bank they like, whose officers they trust, often one bank can handle the business with virtually every cent insured by FDIC.
One reason for the unrest is the rash of rumors and reports that there are FDIC lists that show which banks are in trouble. There is a “problem” list and talk of a “watch” list, but they’re not available to the public, nor to most bankers. Several private services rank and rate banks but they vary in quality and accuracy.
I’d suggest you go to your favorite bank and ask whether it’s been profitable and for how long. Go back at least two years. Ask for proof. It’s your money, after all.
The information is there, somewhere, but don’t expect any bank in any trouble to buy an ad in the paper or on TV to tell you all about it. Not yet.
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Contact Don Farmer at don@donfarmer.com.
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Something that local bank customers should be aware of is the practice that some financial institutions have started in regards to home equity lines of credit. Some banks have started suspending anymore drawdowns from home equity lines because of concern that home values have dropped significantly since the apparaisal that determined the home equity amount.
#1 Posted by swfljim on July 25, 2008 at 2:18 p.m. (Suggest removal)
To solve the problem of having access to enough accounts for more than $100,000 to put into CDS, open a online brokerage account and have access to hundreds of banks all around the country. They all have FDIC insurance for $100,000 and you can click away to your hearts content moving from bank to bank from the comfort of you computer chair.
#2 Posted by Grhorvath on July 25, 2008 at 3:51 p.m. (Suggest removal)
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