“There will be more bank failures.” That’s the view of John Bovenzi, the U.S. banking official running the failed IndyMac Bank, in Pasadena, California. Consumers should expect to see more bank failures as defaulted mortgage loans shake out of the system, and should take steps to protect their money, he was quoted as saying Monday by Reuters.
After those dire predictions, the official did try to put a more positive spin on things by saying that the forthcoming failures would be limited to small banks. Let’s hope he is right, because there are very grave doubts about whether the FDIC could bail out a Citibank or Bank of America.
But, with IndyMac the fifth US bank to fail this year, it’s worth remembering that not all US bank deposits are FDIC insired. As many US investors have found out, insurance only covers the first $100,000 of deposits.
Reuters reported (our emphasis):
The FDIC was returning up to 50 percent of funds over the $100,000 limit to some depositors Monday, he said. FDIC froze the remainder of those funds and handed out receivership certificates to account holders Monday until claims experts determine how much of that money is insured.
The certificates entitle IndyMac depositors to receive more of their frozen funds as the FDIC sells off the bank’s assets. They will likely have to wait at least several months, if not years, as the FDIC resolves IndyMac’s fate.
Sad tales from normal, middle class investors abound.
“I didn’t think anything like this would happen,” said retired teacher Charles Tengeri from Pasadena, who was first to emerge from the branch after withdrawing $171,000 — about two-thirds of his life savings. “I withdrew as much as I could. I know it’s going to take a little time.”
“I have $360,000 in this bank, and I was misled by this bank,” said Robert Clark, a Glendale resident. “I gave the names of my mother, my sister and my brother on the account so I thought I would be insured. I don’t know what to do. I really don’t know what to do.”
Do you believe this couldn’t happen to you?
Q Wealth Report’s banking expert Peter Macfarlane has been stating for several years that the US banking system is unsafe and unsound. It is your editors’ view that you would be well advised to keep a substantial portion of your assets NOT in US dollars and NOT exposed to US banking risk. For further advice, see Peter’s regular articles in The Q Wealth Report or visit his personal blog at www.petermacfarlane.net