Has anyone's bank failed?

[Dana in OR]

As my initial anger has faded (actually it comes and goes in waves) and I have learned more about what led to the bailout, the reality of our country's economic situation is starting to really scare me.

So, has anyone's bank actually failed? And if so were any changes apparent to you?

I am so hoping that inflation remains stable; if the fed prints a more money we may as well withdraw our money now and buy canned food and other essentials (before the money is worthless).

One sort of alarming thing to me was that our accountant has advised that we should withhold our taxes such that we are about even or have to pay a little (instead of getting a big $$ return). Because the government may not have enough $$ to pay out tax refunds.

If this is the case, how depleted is the FDIC after all the big bank failures these past few days? I am worrying that there will be no FDIC money left by the time other, smaller banks fail (and I am praying that they won't fail!).

Ugh. Push politics and blame aside. I just wish I knew the best course of action for my immediate family, and how this will all play out.

~Dana

[melissel]

Well, WaMu holds our mortgage :001_huh: But we haven't seen any changes so far. I have this inexplicable fear that our mortgage is going to be called unexpectedly, even though it doesn't seem that our LTV ratio is out of whack. Though, they did decrease our HELOC amount by almost $10K based on decreased value. Fortunately, we don't use it for anything.

One sort of alarming thing to me was that our accountant has advised that we should withhold our taxes such that we are about even or have to pay a little (instead of getting a big $$ return). Because the government may not have enough $$ to pay out tax refunds.

OK, that's really scary. We can't decrease our withholding because DH draws a very small salary and is paid his primary income from commissions and bonuses, which are taxed at the highest possible federal rate :glare: From what I understand, that can't be changed, so if your accountant is right, we are in a lot of trouble :(

[Jane in NC]

Well, WaMu holds our mortgage :001_huh: But we haven't seen any changes so far. I have this inexplicable fear that our mortgage is going to be called unexpectedly, even though it doesn't seem that our LTV ratio is out of whack. Though, they did decrease our HELOC amount by almost $10K based on decreased value. Fortunately, we don't use it for anything.



In my opinion you have hit upon the Elephant in the Room for Mr. and Mrs. Joe Average: home equity loans and let me add credit cards.

So if banks fail or are even teetering a bit, it would seem that they would be in a position to call certain loans. Home equity loans and credits cards are the obvious suspects to me. These are loans that many Americans have in recent years (at least in my community where there has been a real estate boom then burst) overextended. I have several friends who are in no position to pay their HELs if they were called--nor do they have much to show for that money because it has been the cushion they have relied on to fund life styles. Apparently many families who were using credit cards for the extras are now using them for food and gas (or so the anecdotal news stories go).

The New York Times quoted some Federal Reserve statistics last summer: the average American family owes about $85K on a mortgage, $14K on auto and student loans, $8.5K on credit cards and $10K on home equity loans. Actually it was illuminating for me to go back and reread that article (http://www.nytimes.com/2008/07/20/business/20debt.html?fta=y) now to see that the hand writing was on the wall. The feds had shored up Freddie and Fannie, commentators noted that banks were viewing loans as assets which could be serviced for long term profit, banks were raising junk fees to help compensate for money they were losing on bad accounts, etc. Anyone reading the papers saw a problem--no one connected to the financial industry could have been that blind!

Grumble, grumble.

Jane

[melissel]

Heh! I hear you. And I am SO glad we didn't use that HELOC. We originally applied for it thinking that we might redo the kitchen, or in case something devastating happened to the house. That nagging little voice of frugality kept us from actually doing anything with it. And a it's a good thing too, because you're right--if it was maxed out and they called it tomorrow, we'd be royally you-know-what. We're also lucky that as of 10/15, our credit cards will be paid off as well (knock on wood).

You know, I don't generally read the news (it makes me crazy anxious), but since DH came home with the details about WaMu and with the debates happening, I've been reading way too much online, and I'm definitely freaked out :(

[mysticamethyst]

One sort of alarming thing to me was that our accountant has advised that we should withhold our taxes such that we are about even or have to pay a little (instead of getting a big $$ return). Because the government may not have enough $$ to pay out tax refunds.

~Dana

We bank at WaMu, well I guess its Chase now. We have been told that our accts. are safe but the tax return worries me, my dh and I really use that as our savings acct. for yearly large purchases, what are the chances of it really not being there? Country Wide held our mortgage, which is now Bank of America, we are barely hanging on but we keep getting told we have to put 20% down again to re fiance, which we do not have; but if we were super behind we could get it done. That makes no sense to me. Thankfully in Dec. one of our cars will be paid off, then all we have is house, one car and monthly bills. I don't mind saying this is really beginning to worry me. We have no savings, my garden died, honestly I don't know what I am suppose to do to prepare at this point, other that hope they get it right.

[Kelli in TN]

Push politics and blame aside. I just wish I knew the best course of action for my immediate family, and how this will all play out.

~Dana

I have been mulling over the same thing.

And let's say a family's problem is not where to store the money, but the incredible level of debt they possess? What then? Are the banks and credit card companies going to call for people to pay off the balance immediately? If that were to happen we would literally be homeless.

I wish we'd listened to Dave Ramsey. We were always going to someday, but first we wanted this and we wanted that and then there was no emergency fund but somebody blew a tire or the brakes were squeaking and so on and so forth.

[Pam "SFSOM" in TN]

I have been mulling over the same thing.

And let's say a family's problem is not where to store the money, but the incredible level of debt they possess? What then? Are the banks and credit card companies going to call for people to pay off the balance immediately? If that were to happen we would literally be homeless.

I wish we'd listened to Dave Ramsey. We were always going to someday, but first we wanted this and we wanted that and then there was no emergency fund but somebody blew a tire or the brakes were squeaking and so on and so forth.

The debtor is servant to the lender. That's such a scary thought for me right now. :001_huh:

[melissel]

We have no savings, my garden died, honestly I don't know what I am suppose to do to prepare at this point, other that hope they get it right.


I wish we'd listened to Dave Ramsey. We were always going to someday, but first we wanted this and we wanted that and then there was no emergency fund but somebody blew a tire or the brakes were squeaking and so on and so forth.

:grouphug::grouphug: No kidding. We are almost out of debt, but what scares me in our situation is that DH sells real estate in a market where a large portion of his sales base is comprised of Manhattan commuters, most of whom are in financial services. My company has just been acquired by our largest competitor, and my new manager has specifically told me that our combined department is now overstaffed :eek:

I hear you on the homeless thing!

[lynn]

In my opinion you have hit upon the Elephant in the Room for Mr. and Mrs. Joe Average: home equity loans and let me add credit cards.

So if banks fail or are even teetering a bit, it would seem that they would be in a position to call certain loans. Home equity loans and credits cards are the obvious suspects to me. These are loans that many Americans have in recent years (at least in my community where there has been a real estate boom then burst) overextended. I have several friends who are in no position to pay their HELs if they were called--nor do they have much to show for that money because it has been the cushion they have relied on to fund life styles. Apparently many families who were using credit cards for the extras are now using them for food and gas (or so the anecdotal news stories go).

The New York Times quoted some Federal Reserve statistics last summer: the average American family owes about $85K on a mortgage, $14K on auto and student loans, $8.5K on credit cards and $10K on home equity loans. Actually it was illuminating for me to go back and reread that article (http://www.nytimes.com/2008/07/20/business/20debt.html?fta=y) now to see that the hand writing was on the wall. The feds had shored up Freddie and Fannie, commentators noted that banks were viewing loans as assets which could be serviced for long term profit, banks were raising junk fees to help compensate for money they were losing on bad accounts, etc. Anyone reading the papers saw a problem--no one connected to the financial industry could have been that blind!

Grumble, grumble.

Jane

Wow, how do those people sleep at night. I knew there was a reason I loved having paid off vehicles while my friends were getting brand new cars.

[Wendi]

Well, it's my understanding that the seizure and sale of WaMu was to AVOID having the FDIC paying out. It didn't cost the government anything; Chase bought it.

Wendi
Now a Chase customer, apparently :001_huh:

[akmommy]

Can I ask what may be a stupid question?

What is the difference between a bank and a credit union? Is one safer right now or are they both in the same sinking ship?:confused:

[Dana in OR]

I just saw a news blurb that Wauchovia may be the next big one to go. I'm starting to understand the urgency to get the bailout passed.

~D

[melissel]

Oh NO! That's our bank! Doggone it...

[SapphireStitch]

Wachovia?? Yikes!

I just read these last few posts to DH. 7yo DS was listening and yelled "We have to go over there and GET OUR MONEY OUT!" I have to admit to being somewhat in agreement with him...:001_huh:

[LadyAberlin]

I read that if WaMu hadn't been bought out it would have depleted or almost depleted the FDIC.

[Parrothead]

I read that if WaMu hadn't been bought out it would have depleted or almost depleted the FDIC.

I've always wondered if there was enough money in the FDIC to pay back everyone's money. Apparently not.

[jamnkats]

I admit to getting very nervous and we are not only debt free but we are paid on rent and utilities for the next 4 years. Basically, all I have to do is feed the family with savings if all fails. But we have a good amount of money in a CD at Countrywide. I'm really getting concerned and wanting to move it to USAA (where we do all our other banking - just couldn't help but get the 4.10 rate from Countrywide vs 3.30 at USAA so I jumped for the next 5 months).

Anyone have links regarding what we should do with our savings? I'm thinking Swiss Bank or gold...

[Dana in OR]

I admit to getting very nervous and we are not only debt free but we are paid on rent and utilities for the next 4 years. Basically, all I have to do is feed the family with savings if all fails. But we have a good amount of money in a CD at Countrywide. I'm really getting concerned and wanting to move it to USAA (where we do all our other banking - just couldn't help but get the 4.10 rate from Countrywide vs 3.30 at USAA so I jumped for the next 5 months).

Anyone have links regarding what we should do with our savings? I'm thinking Swiss Bank or gold...

I wish I knew what to say. My first inclination is to sit tight and not move anything; I do believe that eventually everything will be sorted out. Gold is probably at an all time high right now; it is probably no bargain. Smart investors have probably already part of their holdings in gold (I am not a very smart investor!). I also heard on the radio that the US has suspended its sale of gold coins.

My second inclination is to stock up on canned food and eliminate all unnecessary spending.

~Dana

[8FillTheHeart]

My second inclination is to stock up on canned food and eliminate all unnecessary spending.

~Dana

That is precisely what I am doing. I am stocking up on lots of non-perishables. Everything from canned goods, rice, to cleaning supplies, laundry det, etc.

My logic is that if there is inflation, the prices will go up. If not, I haven't wasted any money b/c everything I am buying we will use anyway. I hate running out of things. So, having plenty around is a win-win. (and hey, I'm spending money.....isn't that supposed to help the economy?)

[LadyAberlin]

I have read to put some of your money in a swiss bank because the Swiss franc is stable. Also I heard on the radio the other day that if you have a lot of money in one account to open several accounts and spread it out because the FDIC insures $100,000 per account. I don't know enough about banking, but can you open accounts at various banks all at the same time so that if one goes under you still have money in another?

[8FillTheHeart]

It is actually $100,000 per depositor. So, if you have a joint account with your spouse, you are insured up to $200,000.

[Jean in Newcastle]

I've stopped putting money in our IRAs. They are slowing getting lower rather than higher. At this point I'd rather put that money towards paying bills, paying off the house, and fixing the house rather than pouring it down the metaphorical drain. I don't like putting off our retirement savings but our retirement savings won't mean much if we don't have enough for our basic needs before then.

[True Blue]

We're still putting money into our 401K. I was under the impression that since we're in it for the long haul that it was still the smart thing to do. I have questioned it though. We get a good match from our employer. Does anyone have any knowledge about what to do right now for retirement?

[Jean in Newcastle]

I should mention that we are still doing the 401K thing - just not the IRAs right now. The 401K comes out of dh's paycheck before taxes and has a percentage from his employer so we will continue with that one. But the IRAs were on our own.

[Dana in OR]

We're still putting money into our 401K. I was under the impression that since we're in it for the long haul that it was still the smart thing to do. I have questioned it though. We get a good match from our employer. Does anyone have any knowledge about what to do right now for retirement?

I can only imagine that pulling out of a 401K now would be terrible. First of all, you would not get much, between the stocks that have fallen and penalties. Second, if you can afford to keep putting money in, the dollars you put in now will buy more stocks and rise all the faster once the market recovers. Absolutely stay in for the long haul.

[True Blue]

Okay. That's good to know.

[True Blue]

Oh, we wouldn't pull out. I just worried about putting more money in when we've lost some. It's scary. We are in it for the long haul and are continuing.

[Dana in OR]

Can I ask what may be a stupid question?

What is the difference between a bank and a credit union? Is one safer right now or are they both in the same sinking ship?:confused:

I just looked this up in Wikipedia:

In the United States (http://en.wikipedia.org/wiki/United_States), credit unions have 86 million members, which is 43.47% of the economically active population.[33] (http://en.wikipedia.org/wiki/Credit_union#cite_note-32) U.S. credit unions are not-for-profit, cooperative, tax-exempt organizations.[34] (http://en.wikipedia.org/wiki/Credit_union#cite_note-33)
U.S. credit unions can be chartered by either the federal government ("federal credit unions")[35] (http://en.wikipedia.org/wiki/Credit_union#cite_note-34) or by a state.[36] (http://en.wikipedia.org/wiki/Credit_union#cite_note-35) All federal credit unions and 95% of state-chartered credit unions have federal deposit insurance (called "share insurance") through the National Credit Union Share Insurance Fund (http://en.wikipedia.org/wiki/National_Credit_Union_Share_Insurance_Fund) of at least $100,000 per member.[37] (http://en.wikipedia.org/wiki/Credit_union#cite_note-36)[38] (http://en.wikipedia.org/wiki/Credit_union#cite_note-37) This federal deposit insurance is backed by the full faith and credit of the United States government and is administered by the National Credit Union Administration (http://en.wikipedia.org/wiki/National_Credit_Union_Administration).[39] (http://en.wikipedia.org/wiki/Credit_union#cite_note-38) As of December 2006, the National Credit Union Share Insurance Fund (http://en.wikipedia.org/wiki/National_Credit_Union_Share_Insurance_Fund) had a higher insurance fund capital ratio than the FDIC (http://en.wikipedia.org/wiki/FDIC) Bank Insurance Fund.[40] (http://en.wikipedia.org/wiki/Credit_union#cite_note-39) U.S. credit unions also typically have higher equity capital ratios than U.S. banks.[41] (http://en.wikipedia.org/wiki/Credit_union#cite_note-40)
As of the end of 2007, the National Credit Union Share Insurance Fund (http://en.wikipedia.org/wiki/National_Credit_Union_Share_Insurance_Fund) insured more than $560 billion in deposits at 8,101 not-for-profit cooperative US credit unions.[42] (http://en.wikipedia.org/wiki/Credit_union#cite_note-ncua2007-41) For comparison, the Federal Deposit Insurance Corporation (http://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation) insured more than $4,000 billion in deposits at 8,560 banks and thrift institutions.[43] (http://en.wikipedia.org/wiki/Credit_union#cite_note-42) The NCUA and the FDIC are both independent federal agencies backed by the full faith and credit of the US government.

So to answer your question, it sounds like CUs may be in slightly better shape than banks in that they may have been more conservative with their loans (being not-for-profit organizations). But I'm no expert.

Be sure that your CU is one of the vast majority that has share insurance; the excerpt above indicates that 5% of state sponsored CUs don't - now I don't know what that means, maybe they have some other type of insurance.

Thanks for asking the question, we keep our savings in a CU and it is good to know a little more about it.

~Dana

[Jane in NC]

We're still putting money into our 401K. I was under the impression that since we're in it for the long haul that it was still the smart thing to do. I have questioned it though. We get a good match from our employer. Does anyone have any knowledge about what to do right now for retirement?

Michelle Singletary, my favorite personal finance columnist, recently discussed some things that the average bloke should do. You can read her column on diversification (http://www.washingtonpost.com/wp-dyn/content/article/2008/09/20/AR2008092000193.html?sid=ST2008092100538&s_pos=) here.

I'll also add a bit to Dana's comments on credit unions. Because credit unions are non-profits, they tend to have lower fees, an aid to the consumer. My nephew, who is a teacher, found that none of the dealer loans could beat the rate for a car loan given by the NC State Employees Credit Union when he was in the market for a new car. Further, credit unions often work with members to offer mortgages with ten percent down, no PMI, etc. Since members have some common bond (often employer) there is a certain stability to the organization--or there should be a certain stability. If the economy truly tanks, all bets are off.

I am of the opinion that credit unions were not fully participating in the subprime mortgage business since that is not really their mission, but I may be mistaken. I know that my credit union has had a much lower default rate on mortgages that the local banks--I asked!

Jane

[Jane in NC]

Here is an interesting opinion piece by an economist at Yale that appears in today's Washington Post: Everybody Calm Down. A Government Hand in the Economy is as Old as the Republic. (http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092602838.html?hpid=opinionsbox1)

Whether you agree or not, Shiller's piece is thought provoking.

Jane

[Jane in NC]

Well Dana,

It appears that I am just taking over your thread. Financial stuff is my cup of tea (in the non-WTM sense!), but no one in my household is quite as fascinated by all of it as I am. Hence I turn to the Internet.

Anywho, I saw that the Washington Post answered a question on the safety of credit unions earlier in the week. They wrote:

Q.What is the impact of the government's financial rescue plan on credit unions?

A. The impact on credit unions seems quite minimal. These nonprofit cooperatives do not hold many of the investments that are poisoning other financial institutions, so they have weathered the crisis fairly well.

Credit unions have kept about 70 percent of their mortgage loans on the books, meaning that they did not sell them off to other institutions, according to the Credit Union National Association. The group said that less than 1 percent of credit union mortgages were in delinquency at the end of the first quarter. Delinquencies on other loans have edged up to 1 percent.

"If they've got their money in a federally insured credit union, they're just hunky dory," CUNA spokesman Patrick Keefe said.
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Still, credit unions are lobbying Congress and the Treasury Department to be included in any legislation that would allow financial institutions to unload bad mortgages. Keefe said few CUNA members would likely need the help, but the group wants to make sure that they have the same options as other lending institutions.

Again, there are probably some stinker loans at CUs but in general they seem fairly healthy.

Jane

[neesek]

One thing you can do is to look on the FDIC website and find your bank. You can then look at their assets and liabilities and capitalization. If you are not inclined to do your own financial analysis, :) here is an excellent site that does the analysis for you and rates the banks accordingly.

http://www.bankrate.com/brm/safesound/ss_home.asp

We bank at a smaller community bank which tends to be "stingier" about mortgage requirements. They do not seem to have much invested in the riskier types of securities, so I feel pretty safe leaving our money there.

[Laura R (FL)]

I haven't read all the other posts, but thought I'd chime in before I cook dinner...

We bank with WAMU..ahem...Chase. :) A few months ago our HELOC was not called, but all extra credit was removed. We had just had the house appraised for an extension of credit, too. So, we worked with the bank and had our original limit restored. We had three checking accounts, three savings accounts, I think we just cashed our CD, a mortgage, a HELOC, and we owned stock. Other than seeing the stock dropping, we didn't have any sign. We found out the same day everyone else did. We're not really conerned, though, as we feel pretty confident with Chase. We atre even hoping that out stock will rebound since we bought it pretty low.

As for 401 accounts, I wouldn't pull out and I would always take advantage of matching funds. Many of these accounts are based on diversified stocks, designed for the long haul. Remember last week or the week before, there was really only a 40 pt difference between Mon and Fri. We've made it through the gas crisis of the 70's/80's, we've made it throught the S&L crisis, we've made it through the dot bomb, and we'll make it through this. Maybe I'm just really optimistic!

We've been in negotiations to purchase a house with Countrywide that was a foreclosure, hoping to move in Dec/Jan. We don't know what is going on with the deal now, but we just have to be patient and let the market work itself out a bit.

I'm also grateful that I have a very low mortgage with a lot of home equity and no car payments. I don't feel the crunch as heavily as others. I hope this is something my children can learn from us.

[WTMindy]

My dh is worried, but he tends to be a worrier. I always assume that the worst won't happen and so I don't worry about it. But, I have been thinking about it a lot today!

[CalicoKat]

As my initial anger has faded (actually it comes and goes in waves) and I have learned more about what led to the bailout, the reality of our country's economic situation is starting to really scare me.

So, has anyone's bank actually failed? And if so were any changes apparent to you?

I am so hoping that inflation remains stable; if the fed prints a more money we may as well withdraw our money now and buy canned food and other essentials (before the money is worthless).

One sort of alarming thing to me was that our accountant has advised that we should withhold our taxes such that we are about even or have to pay a little (instead of getting a big $$ return). Because the government may not have enough $$ to pay out tax refunds.

If this is the case, how depleted is the FDIC after all the big bank failures these past few days? I am worrying that there will be no FDIC money left by the time other, smaller banks fail (and I am praying that they won't fail!).

Ugh. Push politics and blame aside. I just wish I knew the best course of action for my immediate family, and how this will all play out.

~Dana
the advice you got about reducing your tax refund isn't new news. It make sense to NOT give the government your money just for them to hand it back again--money that you could have put in a bank gaining interest all year long. It's something about increasing tax deductions so that you owe them money, not them owing you. And putting money in an interest bearing account. In the end you come out the winner.

[OnTheBrink]

I use a CU, and just looked it up. It has a rating of 2 (with 1 being the best) for being safe and sound and a 4 star rating (with 5 being the best) from BankRate.com's star rating.

So, I feel ok, for now.