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How safe is your money? What the IndyMac bank failure means.
July 15, 2008
It has always been assumed that if your money was in the bank, it was safe. Right now, that is not necessarily the case. Panic has ensued and there are not many "safe assets" where your money can be.
As loan defaults mount and home prices continue to fall, US regulators are preparing for other banks in America to fail. This has led Wall Street analyst to ask themselves: How many will fail and who will be next?
Over the weekend, one of these questions was answered. IndyMac Bancorp Inc., a bank who specialized in risky mortgages, became the latest casualty of the subprime mortgage crisis, as federal regulators shut down the troubled savings bank in the largest U.S. bank failure since 1984. The bank had total assets of around $32 billion at the end of the 1st quarter.
Regulators said the immediate cause of IndyMac's failure was a deposit run in recent days that began after a June 26 letter to the FDIC from New York Senator Charles Schumer was made public. By July 10, depositors had pulled more than $1.3 billion from their accounts.
Most of the bank's clients, around 265,000, have deposits that are insured by the FDIC. However, there were over 10,000 clients who had roughly $1 billion dollars in deposits that will not be insured. These clients have deposits that exceeded the $100,000 maximum that is covered by the FDIC.
These clients will have to stand in line with all of the other creditors that the bank owes money to or they can take what the FDIC will offer them, which will be 50 cents on the dollar. Essentially, these clients lost half of their money literally over night.
It is time to check where your money is and consider diversifying your assets now.
Precious metals and rare coins are assets that have proven to help investors preserve and build their wealth. While others wait in line to check on their overall wealth, you can rest assure that these assets from Blanchard and Company, Inc. will help your overall portfolio.
In today's uncertain market, people are motivated by fear. Making a run on a bank could happen at any bank in the country, all there has to be is a rumor that the bank is failing and people will line up to take money out. Once the panic ensues, there is no stopping It, just ask Indymac.
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Copyright © 2009 Blanchard and Company, Inc.
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