One option for getting us out of this finanical meltdown
Just got a feeling that we've been spooked enough. I've read your comments and the genuine fear that I see is about bank deposits and mortgages being made.
The FDIC, in my opinion, has been doing a great job of arranging mergers and reassuring depositors. Credit unions want you to know they, too, carry federal insurance from the National Credit Union Administration. .
Goldman Sachs, Morgan Stanley and recently Raymond James have decided to become commercial banks. Doesn't that give you a sense that deposits are sound?
I think the best idea of the morning is to increase FDIC insurance limits, so that depositors are more assured.
FDIC insurance premiums are paid by the industry. And isn't it about right that banks, the ones with all those sound deposits, chip in to resolving this crisis of confidence?
Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.
Comments
"And isn't it about right that banks, the ones with all those sound deposits, chip in to resolving this crisis of confidence?"
Makes sense.
But, that's pretty similar to taxpayers bailing out those who gambled by making purchases they knew they could not afford.
If healthy banks help take care of the mess produced by their sloppy counterparts, then are you suggesting that we, the taxpayer who played by the rules, bail out those who didn't?
I'm not disagreeing. I'm merely raising the question.
No easy answers to this mess.
Posted by: Mark Wolfinger | September 30, 2008 1:11 PM
My question is after all of this bailing out and such how secure is the FDIC? I mean, we Floridians know that insurance isn't exactly an assurance of things happening the way they should. Can the FDIC just drop a bank because they are "uninsurable" or raise the premiums to the point that it makes no sense for the bank to keep them around? I know homeowners insurance is different then insurance for financial institutions but I haven't seen anyone raise this question.
Posted by: drew | September 30, 2008 2:04 PM
Excuse me,
But from where I am sitting; this financial crisis appears to be stemmed from greed. And throwing money at it is NOT the answer.
I am sorry that people are losing their homes. But the harsh reality and truth is: they couldn't afford those homes to begin with. A couple making $50,000 a year had NO BUSINESS buying a $500,000 house. If the home prices were unreasonable, then you continue to rent. I am in my late 30's and when my husband and I bought our home (our first) we stuck to the "25% rule". Your housing should not comprise of more than 25% of your budget. Period.
As to the banks: Too bad. Last I checked, bad business practices led to a business folding. The banks made bad decisions based on greed. They wrote mortgages they shouldn't have for people who truly couldn't afford that home. As a result, they lost money. Surprise! That's what happens.
Here's my question:
If I lend a bunch of people money; people that can't pay it back - and I am on the verge of losing my home due to being unable to pay the bills (because those people didn't pay me back)- is the House going to convene and then give me money to make ends meet? Nope, I didn't think so.
Posted by: Becky | September 30, 2008 5:15 PM
I agree with the FDIC needing to raise the limits. $100K sounds like alot of money but in reality when saving for retirement in today's dollars it isn't much. Becky, it is true that the problem stems for greed, however, the greed has now spread to communities and decent homeowners who did the right thing. Some areas are seeing home prices from 02/01. So if you bought a home in 02, put 20% down your equity may be gone. It doesn't sound like much, but just as your husband and you saved to put the money down on a house so did that person with the 20%. So lets say markets stabilize in 1 to 2 years and return back to a 3-5% yearly increase. That means it would take that person 4-6 plus years after stablizing just to get back their 20%! In 4 to 6 years alot of things can happen in life. Is it fair for that person to have to walk away from a opportunity even if they did nothing wrong? this affects more people than just those that took out "bad" loans.
Posted by: Anna | September 30, 2008 10:03 PM
Actually, this entry is slightly incorrect. Credit Unions do NOT carry FDIC insurance, as they are not full-fledged banks. Instead, Credit Unions typically carry insurance from NCUA (www.ncua.gov), which plays basically the same governmental role for credit unions for the same amount of insured funds ($100,000 per covered party).
Hopefully Congress will be smart enough to realize that if they raise FDIC limits, they need to raise NCUA's as well.
In addition (although very rare), certain types of Credit Unions can opt to use a private insurance firm, either for primary insurance purposes, or to insure deposits beyond the $100,000 amount covered by their NCUA insurance. One firm providing this sort of insurance is American Share Insurance (www.americanshare.com).
However, the belief in the federal insurance plans is so strong that one credit union I belonged to which had insurance from ASI had to move to NCUA because the first question potential customers often asked was "Are you federally insured?" Often after they got their answer, they turned and walked away.
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Posted by: Lisa | October 1, 2008 7:31 AM
You are right, Sam. I'm changing the entry to reflect that. Thank you. hjb
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