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Like many people, I keep my money in a bank. I am considering moving it to a sock. (Warning: that is my personal feeling. Don't let me be the cause of a mass exodus from banking institutions! And anyway, socks are notoriously prone to disappearing; at least you can't lose your bank in your clothes drier.) Each day I open the paper with a certain amount of dread. What's going to happen to my bank? What will these unprecendented days mean for my money? Sure, I understand intellectually that the FDIC insures individuals up to $100,000 (which, sadly, is more than enough), but emotionally I'm fearful. Should I stay where I am? Move my money to a credit union? Line my floorboards with gold? Where is my money more safe: a large bank, or a small one?
These are the questions I'm asking myself, my colleagues are asking each other, and you have likely been talking about over the last few days. The news -- Citibank's buying Wachovia, JPMorgan Chase acquiring Washington Mutual, Congress rejecting the $700 billion buyout, and the Dow dropping 777 points -- is keeping may of us on edge. But do these big changes signal a major shift in banking or just new checks logos and bright plastic signs?
Tomorrow we'll talk about how day-to-day banking in the Pacific Northwest actually is -- or is not -- changing in these scary financial times. Are you doing anything in reaction to the changing banking landscape?
Photo credit: Tracy O / Flickr / Creative Commons
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"Line my floorboards with gold?"
My brother worked on that Alaska Pipeline and met and later visited at home a fellow who used a gold ingot as a doorstop figuring that nobody would suspect it was real gold.
But really, it is far past the time to invest in and "take delivery" of actual gold. If you had bought "Gold Shares" and the company that held your shares went banko, you're out of luck. Holding actual gold is a risk because of stealing and also at the time of sale your gold has to be assayed to be proved real.
Real estate that is paid off is good, and liquid cash, liquid cash is king in a depression, you can buy up everyone's losses for pennies on the dollar.
But I'd guess that for most of us it is time to sit tight and don't make any large purchases, trust the FDIC on savings if any, but remember that your job might not be there to support any large commitments of debt.
Batten down the hatches and put a storm reef in the sails, there's a big storm ahead! -
Check out a credit union. Your money will put to work locally and you can rest knowing that your CU isn't buying CMO's, sub-primes, or other wacky stuff designed to enrich Execs and high flying Board members. Credit unions are not-for-profit financial cooperatives. They answer to local members/customers, not to Wall Street's quarterly expectations.
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Been with a credit union since the mid 1980s. Wells Fargo treated me and my piddly amount of money like we were a nuisance so I voted with my feet. Wells Fargo charged fees for everything and became customer unfriendly.
Upon joining a credit union I wrote letters to congressional representatives because big banks sought to derail the fledging credit union movement. Fortunately the big banks were unsuccessful. Haven't been to a big bank since the mid 1980s except for rare occasions.
One useful service my credit union provides is shared-branch banking. I lived in another town for awhile but I was able to conduct banking at a member shared branch. Two completely different credit unions shared a common banking interface to perform seamless transactions with my existing account. -
Yup, I concur with the sentiments above. Try your CU, they are competent at evaluating loan qualifications and personable with real folks...
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Here's a helpful list of bank failures since 2000 -- as of five days ago -- compiled by the FDIC. It's interesting to note that very few of the 41 banks are familiar names (The Malta National Bank, Malta, OH?).
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I find myself reevaluating how much I care about the things money can buy: new clothes, books, electronics, etc. Do I really need all this stuff? This is partly because I'm trying to be more frugal. But a bigger part of it for me is the fact that more stuff will not make me happier or more unique or more human. I don't want to buy into the rampant consumerism anymore.
The scare tactics our politicians are using are repulsive. Remember President Bush telling us, post 9/11, that everything would get back to normal if we just went shopping? And what about that economic stimulus a few months back that was supposed to fix the economic downturn? When they tell us that this failure to pass the bailout will be catastrophic for "Main St" what they aren't owning up to is this: the government's deregulation created a system wherein the labor of those of us at the bottom cumulatively created enormous wealth for those on top of the socio-economic ladder, and now that "Wall St." is crashing down, those most hurt will be those toiling away at the bottom.
Money won't solve my problems, and it won't solve the country's. -
Lets hear from our congressmen who voted against the bail out just who they were protecting looks like wall street cleaned out the small investor in 401's and mutual funds yesterday and also left a single home owner in a sub prime loan holding the bag while wall street movers and shakers go their way as always..Lot's of sub primes are speculations do not bail them out real home owner need help.
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Americans have been lied to so often by politicians that it is likely that when the sky actually is falling, no one will believe it until it's too late. American's neither like nor understand the bailout--neither Republicans nor Democrats. It's five weeks before an election, and Congress is afraid that anyone who votes for it will be removed from office.
This gives us a situation in which it is doubtful that our leaders can make us believe that there really is a huge problem, and representatives who do believe and do vote are risking being voted out of office.
I have listened to all the economists who disagree, and I certainly don't claim to know enough to have an opinion on which one is right. This means that whatever we try, it may not work, we might not know why it didn?t work, and no one will believe that any failed plan was a good faith effort. Here is what I do know:
The $700 billion is to buy mortgage backed securities from banks that are stuck with them because no one is buying them at any price. The value of these securities is unknown because there isn't adequate transparency to know what percentage of the mortgages that back the securities are non-performing. Because of the way the mortgages were bought and sold, some mortgage-backed securities are backed by a much greater percentage of bad mortgages than others, but there is no way to tell the difference between bad, worse, and worst. Also, economic theory says that we learn the value of any item by looking at what markets are willing to pay. Because no one is willing to buy these securities, no one has any idea what they are worth. The bailout problem is that if the government pays too much, the Wall Street crooks get too good a break. If the government pays too little, banks won't have enough money to lend and the crisis will continue. Banks need to exchange those securities for cash in order to have money to lend. The business community and the politicians are so worried because it was banks running out of money to lend that produced the cascading failures that made up the Great Depression. -
It seems to me that this has a lot of parallels to the war in Iraq: it was a lot easier to get in than to get out, and now that we're here there are no good options. I can follow the basics of it, but I really can't evaluate all the options in detail. I am convinced that there is a real problem that needs to be dealt with in the short term, and I have no illusions that whatever is done now is going to fix things for good. I have little or no faith in the Bush administration to act in the best interests of middle-class people like me, but I think my only option is to hope that between the administration and the Congress, they will step up and show some leadership. Put together something that is going to clear up some of the immediate problems, take a deep breath, and pass it! Then we all need to demand that the next Congress will tackle the underlying problems and do something to solve some of those.
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Credit Unions are always a good thing to belong to no matter what the current economic situation. But if you are thinking about taking your money out of your bank and putting it into a credit union, make sure the credit union is insured by the National Credit Union Administration. Otherwise, you are jumping out of the frying pan and into the fire.
There was something on the order of a 16 billion dollar bank run on Washington Mutual before it went under. This is an irrational over-reaction. Everyone who had money in the bank at WaMu when it collapsed still does. Their account numbers won't even change with the takeover by JPMorgan Chase.
Yes, the FDIC is in a tight spot. If two or three large banks like Washington Mutual went under and their depositors had to be reimbursed by the FDIC, the FDIC would run out of money. Since the 1980s, banks have been allowed to cut back, or outright eliminate, their premium payments to FDIC. As a result, the FDIC is low on cash reserves.
But if the FDIC ran out of money, the solution is very simple. It would be given more cash by Congress, at the taxpayers' expense. This is what happened to the FSCLIC during the S&L crisis 20 years ago.
To avoid running out of money, the FDIC is brokering deals between buyers and banks that are in trouble. That is why you see JPMorgan Chase buying WaMu. This prevents the FDIC from having to bail WaMu's depositors out.
So the chances that you would lose your money in any bank is slim to none.
If you decide to buy actual gold or some other valuable commodity, for god's sake put it in a safe deposit box. But, again, that's being somewhat irrational.
If you want to put your money to work, your best bet right now is Certificates of Deposit (CDs).
There are no investments which are making a lot of money. And some are losing money. But CDs are a guaranteed return, and they are insured. -
I wasn't able to get on air and wanted to make a point. Of course, we all need to make sure that our depositis are insured--by the FDCI or the NCUA, but the anxiety in financial services is not about insurance defaults. It's about bad lending practices and bank failures.
Credit Unions are not primarily motivated by profit. They answer only to their members (known as customers in other businesses) Credit Unions are not answerable to remote stock holders or to Wall Street's quarterly expectations. Maybe more importantly these days, credit unions' Board of Directors are volunteers. They are not major stock holders who have a vested interest in moving a stock price.
This business structure results in different business practices which has kept most credit unions out of ill-advised sub-prime loans. -
By law, no bank is allowed to posses more than 10 percent of our country's deposits. When Bank of America acquired Countrywide, they went over the 10 percent limit. And now they have acquired Merrill Lynch.
Clearly, large exceptions in the law are being made for BAC. -
We bank with a CU and are in the process of switching from one CU to another. About a year and half ago we pulled our money from our Employee owned CU and moved it to Oregon Community CU. Oregon Community offered us around 5% interest on our Checking. We are now in the process of switching back to our Employee owned CU because they now offer a higher interest on our checking.
You tell me what bank would offer such high interest in a checking account? They are paying us around $50 a month to bank with them. It is a great deal. I would never put my money in a bank over a CU. -
For years I felt kind of dumb and unsophisticated by having almost all my business with my credit union. But I have gotten great rates and great service. And I don't feel so dumb now!
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5% interest on your checking account is awesome.
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But I suspect you have to jump through a bunch of hoops to get that. For instance, there are promotions where you get 5% on checking, but you have to have direct deposit, use your debit card a 10 or 15 times/ month, use the online bill payer and other things. I'm told that most people don't meet the criteria most months - and the credit union is betting on that because if they had to start paying everyone 5% they'd go under.
However, that's not to say that CUs are bad. I much prefer CUs to banks any day. -
For me the problem is that I don't see the "bail out" solving the problem, just making it possible to limp along with the same flawed system we have now. Banking, social security, health care, oil dependency, education, and on, and on. We don't seem to fix anything until it actually breaks, even when we see disaster looming.
It is like living in a house with a crumbling foundation and having people yell for spackle so they can fix the cracks in the wall. -
Heh. I'm not even calling it a bailout any more.
Look at it this way. We have a potential borrower who wants us to loan him money to pay for his mortgages. This borrower has a falling income, a horrible credit rating, and is a huge risk for default.
That's a liar loan, not a bailout. -
I'm a Washington Mutual customer; however, I pulled the majority of my money out and moved to Wells Fargo. As soon as a few outstanding checks through WaMu clear, and my direct deposit is going to Wells Fargo, I'm going to close my WaMu accounts.
I understand that my deposits with WaMu are insured, and that they are now part of JP Morgan. Here are my reasons for moving to Wells Fargo.
1. I did not want any disruption in my ability to bank should something really bad happen to WaMu and I have to get my money back through FDIC.
2. I decided that I did not want my money with WaMu, which in my mind, demonstrated poor business sense in allowing itself to get into this situation. They made bad loans and obviously had bad policy.
3. Wells Fargo, according to my research, had very little money tied up in bad debt and is a very fiscally conservative company. While other banks were suffering, Wells Fargo seems to have done quite well.
Sorry, WaMu. It's all a matter of confidence and trust. -
There you go, gbrumley! Andy Giegerich, with the Portland Business Journal, says he wishes all consumers were as smart as you?
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Banking in Oregon has been changing since the 80's, latest failures are just a continuation of downward spiral. When I moved to PDX in early 80s there were many Oregon-based banks and S&Ls. Had account at Benjamin Franklin S&L (remember them?), liked the fact it was locally based, and paid decent interest rates. Today there is no large bank or S&L left in the PacNW (US Bank now headquartered in MN, WAMU now part of JPM). Have had accounts in Oregon based credit union since late 80s. Credit unions are a coop that serve its shareholders (us customers), not wall street investors who want qtr-over-qtr profit growth. Hopefully everyone will remember this debacle and push back on large banks next time they try to 'level the playing field' by wiping out credit unions.
Larger question I have is how can banks better encourage saving - hard for me to convince my kids to save when interest rate is 0.25% instead of 5%. -
Banks are banks...If you deposit your money, the bank has to do something with it! Read: loan it out. This sets up a scenario, where not everyone can withdraw their money at the same time. Its called a float. The bank is required to hold a percentage of deposits in its "cash drawer."
Banks provide a useful purpose for the local community. That said, if one lives in a big "sandbox" using a large bank has its benefits. One can be in Singapore or Denmark and use an ATM. Local banks are good for small neighborhood business and house building.
As with the Full Faith and Credit of the United States government: The dollar has been sold down the river. Soon we will have a new international monetary system because of globalization. Many national leaders are already calling for meetings to talk about this issue. The Bretton Woods agreement is disintegrating before our eyes. -
Lots of pluses and minuses with credit unions. The big minus is accessibility. There just aren't as many ATMs and branches as a bank.
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My credit union (where I have most of my accounts) operates in Oregon only; HOWEVER, when I travel out-of-state, I've had easier access to free ATMs and branches with my credit union than I've found through my big bank.
How is this possible?!
Credit unions throughout the US and Canada share free access to their 25,000 ATMs, all fee-free for participating credit unions' members. It's called the CO-OP Network and that's a lot more free ATMs than I have with my bank (which is mostly on the west coast). Credit unions also have another convenience where thousands of participating branches "share" services for their combined members. That's HUGE! I've only used that service a couple times, but it was nice to be able to get an advance on my credit card when I was far away from Oregon.
Last of all, with PC banking and 24-hour computer "tellers" by phone, who really wants to spend gas money driving to locations? I now do most of my banking online, and yes, that's with my local, Oregon-based credit union. -
My mortgage was just taken over by Citibank, It was with Wacovia. Wacovia bought my mortgage from World Savings. I stipulated when I got my mortgage that it not be "securitized". Securitizing is bundling loans together with others at different risks and sold. I wanted to deal with one holder and not have my mortgage sold. Now, it is very possible that my monthly payments will be sold off-shore.
We need to protect our "community banks". One wag quipped that a community bank is any bank that is off the island of Manhattan. The little will be eaten by the big, and the big banks have all the toxic assets.
Look up reverse repo
We need to protect our regional banks and especially our credit unions.
A farmer who has looked deeply into banking is says his stuff at moneywealth.org A great book on all of this is Web of Debt by
Ellen Hodgson Brown
Good luck and built community. -
Hi David,
Was the request that your mortgage not be securitized something pretty normal in the process? Or was it a special request? Did requesting that require any additional paperwork? -
It was a special request. I got that loan through a mortgage broker. It did not require extra paperwork, rather an investigation of the culture of the loan institution. World Savings did not "securitize" and that is why I chose them. Perhaps in March, if I recall, they called and offered better terms while getting out of an ARM with a fixed rate loan. Have you ever had your bank call you with an offer like that? Two months later World Savings sold out to Wacovia and got out of the mortgage business. I bet it would be interesting to interview the World Savings owner.
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I visited our local WAMU bank branch the morning after its sale was announced, as I had some banking to attend to. The employees were so gracious, and my husband I worry about what happens with the employees 401K's and their job security...
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More information about Bank of America exceeding the ten percent law: http://www.reuters.com/article/bankingfinancial-SP-A/idUSN1554362020080115
There was also a story about it earlier this year on your parent station, NPR. -
Another thing about Credit Unions is pride as a member-owner. I am a member of SELCO, which is based in Eugene but has branches in Bend and some other cities also. On my way in, I've picked up windblown trash from the landscaping because I like to keep my CU looking good. And I've told a teller about a broken sprinkler head, so that we can get it fixed and save on water.
SELCO has the nicest "bankers" I've ever done business with, and I'm proud to be a member-owner. -
Merrill Lynch has 100 billion dollars in U.S. and overseas deposits.
BAC is again going to have to find a loophole to get around the ten percent cap. -
The reason I am belaboring the point about the ten percent cap and Bank of America is because if BAC runs out of loopholes and is over the ten percent cap, they will have to shed deposits. And the quickest way to shed deposits is to make your depositors feel unwelcome. And you do that by introducing or increasing fees, fees, and more fees.
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They say banks are insured (FDIC etc), but how long typically would it take to get back the savings through FDIC?
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http://www.fdic.gov/consumers/banking/facts/payment.html
They aim for two business days. -
The nubbin of our situation is that far from the "balloon loan" crisis which is blamed on "sub prime" personalities the deep problem is not there. Yes house prices are falling because as a society we acted like turtles gambling on their shells. Not smart.... but not the reason for the collapse. For thirteen months the banks would not trade with each other, they would not trust each other. Why? The money center banks created "creative" instruments that are now ironically called "toxic securities".
One example is the reverse repo. It is the realization of the virtual value of your house assuming a good market in the coming year. That is to say if you house is a 300K and is expected to increase 20K in the coming year, that 20k is then invested elsewhere. It is bunko.
That reverse repo now just not a zero, it is a negative number. How then can assets be valued with this "toxic" element mixed in with "securities".
This is the fruit of the "free market" crowd. They says regulations are bad, and markets are wise. The proof they are wrong is writ large before your eyes and on your savings and future. Those voices ought to be now recognized as wrong, and named and should no longer have the megaphone. This may however require a new crop of publishers and media companies.
I repeat, the banks have not trusted each other since August of 2007! Did you find that covered in the press? More money will not help that lack of trust. The big toxic banks eating the small ones won't help that either.
The answer is to spend, not lend money into the economy by nationalizing the Fed (which is a series of private banks) and injecting production money not obligation money into cities, counties and states to build an post petroleum infrastructure... without interest, while the economy is still intact.
If we wait for the "toxic securities" to be wrung from the system, it will take five to ten years (as Japan in the 90's) and huge loss and destruction will result.
The dollar, our money is our medium of exchange, but now it is two mediums. One is wholesale money in the billions with the banks. the other is retail money among we humans which is getting scarce. That scarcity will threaten local businesses ability to make payroll, and jobs will end,creating a downward spiral. When wholesale and retail money become one medium of exchange, our house prices will stop falling. We cannot depend upon the banks to make this so.
Spending, not lending money into existence as we build a post petroleum infrastructure, as Lincoln did with the greenbacks, is our safe exit from this catastrophe. -
Why is what is happening so difficult to grasp? Perhaps because when you create a system where you make money off of money off of money into infinity instead of the physical good or service, you create virtual money. Its not real or able to be measured in any real way. What is a share of MS worth? A chicken? Three hours of ditch digging? It has become so convoluted as to be its own creature with no boundaries or rules of conduct. And now the creature is hungry. What is hilarious is how we are compelled to feed it more and more for the sake of its existence, our sweet greedy baby. Maybe it is the nurturer in us. And we are encouraging it to propagate with the push towards a global currency. Hmmm. Too much global everything may not be how to create a strong infrastructure. A local currency in local banks based on local goods and transactions is more stable and keeps profits for the little guy and his community.
And yes (Alexis M) it would be so sad to see the fat cats have to eat rice and beans and forego their manicures! A little dirt under the nails is good for the soul.
There is a real limit to virtual profit and growth, no matter what any economist says. Have we reached that point, or even overshot it a bit? Would it be so unlikely that our economic limits are constrained by the limits of our resources? Time to localize, seriously. -
Credit Unions rock. Too bad you spent 55 minutes talking about banks and only 5 minutes on credit unions. (Plus the information the banking guy gave about credit unions was basically incorrect.)
Now more than ever it is important to know who you do business with. I have all my money locally at my credit union; I have my loans there too. I like to know who I am dealing with and that they have my best interests at heart. You can't tell me some CEO in San Francisco is looking for anything more than a bottom line solution. As a member of my credit union I can go to annual meetings and talk directly with other members, credit union senior management, and the board of directors. They have pretty good cookies too. Not only that, I can write a letter and get one back or request a meeting with a manager and get it. When I applied for my home equity loan my loan officer sat down and looked at my entire budget and my future goals to help me find the right credit line that fit. And guess what, he is the guy that approved it - not someone in Minneapolis. When I opened a savings account for my nephew the new accounts representative gave me several good suggestions and a referral to the Oregon College Savings plan so I can help send him to college.
The credit union federal insurance program through the NCUA is fully funded. Credit Unions are a financial co-op where the profits are returned directly to the people who own it; the members - not stockholders. They also belong to a shared ATM and branch network so I can walk into a branch thousands of miles from home and make a loan payment or get cash from a teller.
Come into the light Sarah, and do another show that focuses on the best alternative for financial services - your local credit union. -
Financial institutes do not deserve a bailout; they deserve to go to jail for ripping off and lying to America. If the focus of business was to do the right thing instead of making excessive amounts of money, then the entire world would not be crippled the current situation. Obviously financial institutes do not have the ability to regulate themselves, so government should put some basic regulations on this industry. A government that obviously is just as fiscally responsible as the banking industry. What a joke. Who is going to bailout America? China , Iran, Russia? America is for sale . . . . buy, buy, buy.
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Comments are now closed.
And pay yourself the otherwise stockholder "profits"? Yes.
Better loan rates, very prudent financial business, and the pride of being a member of something that helps your fellow man/woman, make haste Sarah Jane, get thee to a Credit Union!