Topic: The Banksters
Yes, West Virginia, There is a Banking, Housing, and Financial Crisis - FDIC Closes Ameribank FDIC Closes Bank #12 for 2008, Ameribank, a Small WV Bank Gets the Axe. Have you protected your family? Learn how.by Jake, the Champion of the Constitution
(libertarian)
Monday, September 22, 2008
In disbelief that with all the financial fallout last week there were no bank failures? Believe again, on Friday a FDIC team closed Ameribank, a small bank in West Virginia. The Associated Press reported "Ameribank ran into trouble because of "excessive growth" in the construction loans for property rehabilitation, mainly in low- and moderate-income housing markets, according to the federal Office of Thrift Supervision." The bank had been "critically undercapitalized" for the past year.
This bank failure will cost the FDIC $42 million, just 0.1% of the FDIC's remaining funds of somewhere in the mid-40 billions. However, $42 million is $42 million.
Be on the lookout for further failures. Is the day when YOUR bank goes under and the FDIC posts a page like this on its webpage? Washington Mutual in particular has notable recent issues with its share price and capital, but Citigroup, Wachovia, Wells Fargo, Bank of America and many others are also not doing well.
How to protect yourself?
First understand the FDIC and the nature of the banking system. Here's the fastest lesson I can manage. Try my other writings or just search the net for more information.
In brief, the FDIC is a relic of the Great Depression designed to give depositors the assurance that the government will bail them out if the bank fails. It is funded by small fees on all deposits its member banks hold. The FDIC started 2008 with about $53 billion in reserves. Due to the failures at IndyMac and others, the FDIC fund most likely has about $40 billion left. In August, the Federal Reserve reported that all savings deposits, small-denomination time deposits, and retail money funds (more or less the banking system insured by the FDIC) was $6,334 billion. So if bank failures exceed just half-of-a-percent of the system, the FDIC will be broke. That is, until the government decides to unwisely print more money (aka debase the dollar or inflation or indirectly tax us) or directly tax us, the taxpayers, yet again.
Our banking system operates on a fractional reserve system. This means that banks only have to keep a certain amount of deposits and can lend the rest. In the USA, the deposit requirement is just 10%. For more detail, read this.
Next, the American banking system is in serious trouble. Check out this graph of Non-Borrowed Reserves of Depository Institutions from the Federal Reserve. Note the plummet in 2008 from, historically speaking, a fairly stable chart. What the chart means is that, as a whole, American banks are borrowing from the Federal Reserve in order to maintain their deposit requirements. The shift from +$40 billion to -$130 billion is $170 billion, which is greater than 1% of our GDP (which is the total market value of all goods and services produced in our country this year). This may at first sound insignificant to some of you, but I tend to agree with the degree of angst the Financial Ninja expresses here: "Oh sweet baby Jesus, you better hope Ben Helicopter' Bernanke really really knows what he's doing." Of course, which banks are doing poorly is a closely guarded Fed secret, but please keep in mind there are 117 banks on the FDIC's secret crash list, out of a total of 8500 FDIC-insured banks. The FDIC updates the number of banks monthly, but do not list any specific banks as this would cause bank runs.
Although I hesitate to hand out advice, I find myself again in a situation where its fairly bleak, so not providing some solutions would make me seem a bit like Chicken Little running around with his head cut off, so here you go! Take a look and decide for yourself, but all of my advice is fairly conservative. Remember, this is not a time to be placid and just mull around, it is time to be realistic, do some research and take action if necessary. Please protect yourself and your family.
First know if your bank(s) are FDIC insured or not. If not, get your money and close the account ASAP as its a sign that the FDIC may have refused to insure it. If yes, you can read the FDIC rules here, and see if any of the exceptions or limits apply to your family.
Second, consider moving your money to multiple banks in the event one would fail. This is called diversification of risk. At any bank, you can request their financial statement and check out the status of their loans and deposits. In general, credit unions will be safer than larger banks, mainly since its loans are limited to only the union members. Large banks like Bank of America, Wells Fargo, Citibank, Wachovia, etc. loan out to a wide range of borrowers, which are subject to failure due to the housing crisis.
Third, withdraw enough currency to cover expenses for several months. My reasoning for this is that even if all of your money is FDIC insured, if the bank fails, there is no guarantee you will get your money immediately. It may take months. If you decide to do this, it is best to also request small bills ($20 or smaller) as if a crisis develops larger denominations some vendors may have issues with handling $50 or $100 bills. Instead of paper money, I advise taking out nickels as the worth of the metal matches the face value, where the paper money has no intrinsic value. It's also fairly amusing and trust me, it will take a thief quite a while to lug out several thousand dollars in nickels.
Fourth, try reading the Money Matrix series below. Decide for yourself what to do to protect your family's financial well-being.
Five, spread the word. For obvious reasons, you won't find this advice from the mainstream media.
If you want a political solution to this, it will not be McBama. Try www.CampaignForLiberty.com. Our fearless grandfather, Dr. Ron Paul, issued a YouTube warning last week on the bailouts that everyone should heed.
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic.
Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.
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FDIC Closes the Silver State Bank in Nevada as a McCain Resigns in Disgrace Published: September 7, 2008 Andrew McCain, son of John McCain, resigns from the board just before yet another small bank goes under. $20 million in uninsured deposits lost. And by the way, did you know the American banking system may crash? Learn how to protect yourself and your family.
America, Were Michael Phelps' Eight Olympic Gold Medals Worth Winning? Published: August 24, 2008 Michael Phelps and other American athletes are bringing back loads of Gold, Silver, and Bronze Medals from the Beijing Olympics. A young libertarian economist asks if it was worth it.
The Money Matrix - Prelude (PART 1/15) Published: August 1, 2008 Prelude and Source List to a Series on Global Monetary Policy of Control and Explaining Big Government's Finances
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