OldArmy91 said:
Bitter Old Man said:
- Any bank is "safe" enough for $100k, because your deposits are insured up to $250k..
That's what Christopher Dodd and Barney Frank want all the sheepel to believe.
Your 'deposit' is NOT your money, it is a loan to the bank according to Dodd-Frank. The 'loan' is only insured up to $250K IF the Fed has enough insurance reserves to cover the total amount of deposits. They don't. In other words, if you deposit in a smaller bank which fails before the 'too big to fail banks fail, then you're okay. If not, don't expect to see a significant portion or any of your deposit again.
This is wrong on so many levels. I'm a banker, so I'm somewhat aware of the subject. Where to start....
1) The Fed doesn't insure deposits, the FDIC does and they are not related to the Federal Reserve. FDIC is backed by the US Treasury, who prints the money.
2) Dodd and Frank are idiots of the highest degree, but they aren't the ones you should be mad at. Bill Clinton (D) and Phil Gramm (R) are the two that led BOTH parties (heavily influenced by the large banks) to repeal the Glass-Steagall Act. Be mad at them. Dodd/Frank just made everything more complicated for consumers to get a loan and for small banks to survive.
3) If the TBTF banks fail, and the FDIC can't cover their obligations (i.e. the US Treasury can't cover it), then you will have a total systemic meltdown. So, while its true that you wont get your deposit back, even if you did it's really a moot point, because your dollar won't be worth anything anyways. Your best investment would be lead and gunpowder at that point.
4) Most small bank failures are not handled with deposit insurance, they are just absorbed by another bank who gets a guarantee on those assets from the FDIC.