Deposit insurance system may face WaMu test

[BR_Parkway]

http://www.ft.com/cms/s/0/fc552bf8-8282-11dd-a019-000077b07658.html

By Krishna Guha in Washington and Joanna Chung in New York
Published: September 14 2008 20:38 | Last updated: September 14 2008 20:38

Attention has focused on the danger presented by the failure of Lehman Brothers. But the failure of a commercial bank such as Washington Mutual can have systemic consequences if it threatens a run on other weak banks.

Washington Mutual – the sixth largest bank in the US – has lost more than a third of its market value recently as investors fear it lacks liquidity and capital to survive the credit crisis.

<snip>

The US Federal Insurance Deposit Corporation covers the first $100,000 in deposits held by each individual in a given bank. As of June 30, 64 per cent of the total $7,000bn deposits were insured in the US – a much larger proportion than in the UK at the time when Northern Rock. the commercial bank, failed.

Nonetheless, this still leaves $2,500bn in uninsured deposits. If a high-profile failure causes these uninsured deposits to shift abruptly in a flight to safety, it could be highly destabilising for the banking system.

[mrJJ]

1. McCain & the GOP Scewed America

McCain & the GOP Scewed America

Gramm-Leach-Bliley Financial Services Modernization Act.

53 Republican Senators plus one Democrat - AYE

44 Democrats no Republicans - NAY

The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.

The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services. Other major mergers in the financial sector had already taken place such as the Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation combination in the mid-1990s. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Acts by combining insurance and securities companies, if not for a temporary waiver process <1>. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.
...
Economist Robert Kuttner has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.<6> Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly".

100's Of Banks WILL FAIL. The FDIC DOES NOT have enough liquid funds to cover the insured depositors. Of course the FDIC will go to the FED and get the needed money. Those funds Will NOT show up on the books as a deficit. The taxpayer gets screwed again.

"John McCain voted FOR the bank laws that led to the current credit crisis. John Mccain's economic advisor WROTE the law. 53 Republicans voted YES to the law. When you're in danger of losing your house, can you take a chance on more of the same from those who wrecked out economy?"

[BR_Parkway]

2. I've seen that posted a couple times - who was the Democrat? and

was it just one of those procedural things so they could bring it back up or something? Or was one of ours really for this POS bill

[mrJJ]

5. How They Voted at link

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00105

U.S. Senate Roll Call Votes 106th Congress - 1st Session

as compiled through Senate LIS by the Senate Bill Clerk under the direction of the Secretary of the Senate

[mrJJ]

6. At link

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00105#position

Hollings (D-SC)

[Selatius]

7. A lot of credit card companies call South Dakota home, I believe, but I could be wrong.

It was either South or North Dakota that has a state legislature that removed the cap on how high a company located on its soil can charge a customer in terms of interest. The Supreme Court ruled that a company only has to obey the interest rate cap in the state in which it is incorporated.

The result: It's why South Dakota and Delaware are sooo popular with credit card companies. In those states, it's legal to charge 25 percent interest.

[Hugabear]

3. Is it time to start pulling money from WaMu?

If you have a checking & savings account with WaMu, would it be time to start pulling your money out? My wife and I both have accounts with WaMu, I'm worried that if they go belly-up we'll be screwed. I know that we're insured by FDIC, but I really don't have much faith in them either.

[tpsbmam]

8. If it were me, I'd take my money out now.....

It's FDIC insured but look at what some folks went through when IndyMac closed.

http://www.latimes.com/business/la-fi-indymac17-2008jul17,0,2003956.story

Waits improve at IndyMac bank branches
Some customers who are attempting withdrawals still report hurdles.
By Andrea Chang, Los Angeles Times Staff Writer
10:20 PM PDT, July 16, 2008
Customers of failed IndyMac Bank faced shorter waits and less confusion at branch locations Wednesday, but some depositors who closed their accounts encountered new hurdles when they tried to deposit cashier's checks at other banks.

Sheryl MacPhee, 46, said she liquidated a certificate of deposit at IndyMac's San Marino branch Tuesday morning after a two-hour wait. She then took the check to a Washington Mutual branch in South Pasadena to deposit.

MacPhee said a WaMu manager told her that under a new corporate policy, the bank was not accepting IndyMac checks. If a customer insisted on depositing the check, it could be eight weeks or more before the full amount would be accessible, she said she was told.

...........

http://www.latimes.com/business/la-fi-indymac16-2008jul16,0,1217522.s...
From the Los Angeles Times
Police show up at IndyMac Branches in Encino, Northridge as waiting
customers clash
People in line seeking to withdraw their money are told to remain calm
or face arrest. A disruption reportedly occurs when some try to cut in
line outside the failed institution.
By Andrea Chang and Andrew Blankstein
Los Angeles Times Staff Writers
12:47 PM PDT, July 15, 2008
Los Angeles police were dispatched to IndyMac Bank branches in Encino
and Northridge this morning when customers waiting to withdraw money
became irate after several people tried to cut in line on the second
day of the failed institution's federal takeover.
Police told customers to remain calm or face arrest as they tried to
withdraw their money.

[angstlessk]

4. damn...those commercials almost 'wued' me to wamu...but I chose

Bank of America when I moved cause Wachovia was not in Detroit...I thank the gods I chose the correct bank...