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Anyone know exactly how the FDIC thing works? Supposing my bank goes under (which I sure as hell hope it won't, cuz it's Bank of America), I'm guessing it'll t

by hugh 18y ago

Anyone know exactly how the FDIC thing works? Supposing my bank goes under (which I sure as hell hope it won't, cuz it's Bank of America), I'm guessing it'll take some time for them to get their act together and I might not be able to access money in the short term. Is this correct? Or can they swing into action immediately to keep the money coming out of the ATMs? In that case it might make sense to have stashes of cash in multiple banks, just in case (and hell, a thousand bucks under your pillow).

tptacek 18y ago
No, it does not make sense to stash a thousand bucks under your pillow.
- kingkongrevenge 18y ago
  I haven't done this, but I actually think it's a good idea to have $1K in fives hidden somewhere. If the power goes out for a week in a region that would be a great thing to have.
  - tptacek 18y ago
    Also: canned goods, petrol, ammunition.
  - nostrademons 18y ago
    Yeah, my sister stocked up on $20s before Hurricane Ike, and it saved her butt. Houston is only now getting power back, so everything was cash-only for a week or so. Also - pasta salad is apparently a lifesaver. It serves like 10, can be eaten cold, and doesn't go bad all that easily.
    - DabAsteroid 18y ago
      It is even better to stock up on $1s.
  - steveplace 18y ago
    When I get the time/money, I'm making an "oh-shit" bag, with my clothes, passport, cash, and other things.
- hugh 18y ago
  Why not? (Apart from the fact that most people tend to move their pillows around during the night...) It's not the perfect response to every crisis, but it can't hurt. If one day you can't get your money out of the bank, for whatever reason, you have enough to pay for your immediate needs for a while. And it's only a thousand, so at most you're missing out on fifty bucks a year in interest. NB. Not that I'm doing it myself, but I already have my money split across two different countries anyway.
kingkongrevenge 18y ago
The FDIC is insolvent. There was never a substantial fund; insurance premiums were simply deposited at the treasury. If a few more large banks fail the treasury will have to come up with the money to cover. Odds are low that the usual customers for treasury debt will want to help (China, et al), so the Treasury will have to collude with the Fed to print up the money to cover. Which means inflation. Another thing to keep in mind is that in the event of bank failure you have no legal guarantees of a timely refund from the FDIC. They may take many months to reimburse you. In any case, there are much safer ways to store your money than at a bank. Directly own equities, such as GLD and currency ETFs. Directly own treasury bills and notes. If your brokerage goes under, or even if the ETF management goes under, you still own the underlying assets outright, regardless of any $100K cut-off.
- nostrademons 18y ago
  > so the Treasury will have to collude with the Fed to print up the money to cover. Which means inflation. Not in this case. If the Fed prints up money to cover a failed bank, it's only replacing the dollars that were destroyed when the bank went under. (When a bank fails and nobody buys it, the money in deposits doesn't flow to a different party: instead, it just vanishes.) The net effect on the money supply is zero.
  - kingkongrevenge 18y ago
    Quite true. However, the end result would still be inflationary because of the effects on the dollar and foreign capital flows.
nostrademons 18y ago
> Anyone know exactly how the FDIC thing works? Usually, they arrange the sale of a bank to another financial institution over the weekend. When branches reopen on Monday, they're owned by a different company. Customers don't notice any difference except the logo on the statement. The WaMu failure is a textbook example, except it happened on a Thursday instead of a Friday. I believe that if the FDIC can't find a buyer, then it assumes the deposits itself and pays them out of its $45B slush fund (now somewhat depleted after IndyMac). Cash flows from ATMs as usual, but it's provided by the FDIC instead of the bank.

by hugh 18y ago

tptacek 18y ago

No, it does not make sense to stash a thousand bucks under your pillow.

kingkongrevenge 18y ago
I haven't done this, but I actually think it's a good idea to have $1K in fives hidden somewhere. If the power goes out for a week in a region that would be a great thing to have.
- tptacek 18y ago
  Also: canned goods, petrol, ammunition.
- nostrademons 18y ago
  Yeah, my sister stocked up on $20s before Hurricane Ike, and it saved her butt. Houston is only now getting power back, so everything was cash-only for a week or so. Also - pasta salad is apparently a lifesaver. It serves like 10, can be eaten cold, and doesn't go bad all that easily.
  - DabAsteroid 18y ago
    It is even better to stock up on $1s.
- steveplace 18y ago
  When I get the time/money, I'm making an "oh-shit" bag, with my clothes, passport, cash, and other things.
hugh 18y ago
Why not? (Apart from the fact that most people tend to move their pillows around during the night...) It's not the perfect response to every crisis, but it can't hurt. If one day you can't get your money out of the bank, for whatever reason, you have enough to pay for your immediate needs for a while. And it's only a thousand, so at most you're missing out on fifty bucks a year in interest. NB. Not that I'm doing it myself, but I already have my money split across two different countries anyway.

kingkongrevenge 18y ago

The FDIC is insolvent. There was never a substantial fund; insurance premiums were simply deposited at the treasury. If a few more large banks fail the treasury will have to come up with the money to cover. Odds are low that the usual customers for treasury debt will want to help (China, et al), so the Treasury will have to collude with the Fed to print up the money to cover. Which means inflation. Another thing to keep in mind is that in the event of bank failure you have no legal guarantees of a timely refund from the FDIC. They may take many months to reimburse you. In any case, there are much safer ways to store your money than at a bank. Directly own equities, such as GLD and currency ETFs. Directly own treasury bills and notes. If your brokerage goes under, or even if the ETF management goes under, you still own the underlying assets outright, regardless of any $100K cut-off.

nostrademons 18y ago
> so the Treasury will have to collude with the Fed to print up the money to cover. Which means inflation. Not in this case. If the Fed prints up money to cover a failed bank, it's only replacing the dollars that were destroyed when the bank went under. (When a bank fails and nobody buys it, the money in deposits doesn't flow to a different party: instead, it just vanishes.) The net effect on the money supply is zero.
- kingkongrevenge 18y ago
  Quite true. However, the end result would still be inflationary because of the effects on the dollar and foreign capital flows.

nostrademons 18y ago

> Anyone know exactly how the FDIC thing works? Usually, they arrange the sale of a bank to another financial institution over the weekend. When branches reopen on Monday, they're owned by a different company. Customers don't notice any difference except the logo on the statement. The WaMu failure is a textbook example, except it happened on a Thursday instead of a Friday. I believe that if the FDIC can't find a buyer, then it assumes the deposits itself and pays them out of its $45B slush fund (now somewhat depleted after IndyMac). Cash flows from ATMs as usual, but it's provided by the FDIC instead of the bank.