Bank recommendation?

[switters]

I'm concerned about keeping my money in the top 6 banks that have very high derivative exposure.

The FDIC insures deposits up to $250k. But if there is a full on financial meltdown and one or more of the big banks fail, would the FDIC really be able to deliver on that promise?

Would it be safer to keep money in local/community banks with less derivative exposure?

I've had my money at such a bank, but they just got bought by a private equity investor who intends to "roll it up" with several other banks he will buy, and sell to a major bank or financial group. So I can no longer be sure that I won't be exposed to significant derivative risk soon.

Wondering how all of you have approached this.

Okay to use a Big 6 bank, but just don't keep more than $250k in any one account/bank? Or better to stick with banks with less derivative risk (though these are getting harder and harder to find)?

[Southernguy]

Re: Bank recommendation?

Colchon Bank

[shiny!]

Re: Bank recommendation?

Personally I prefer credit unions and community banks. Bankrate.com has a Safe and Sound rating tool you can use to check the soundness of the bank(s) you're in now, and the soundness of any community banks and credit unions you have available. I use it periodically to keep an eye on the institutions that have my money:

http://www.bankrate.com/rates/safe-s...aspx?ic_id=ss3

One of the most chilling things I've seen was a notice at my bank after the crash of 2008, saying that the FDIC would insure all depostis of any size. Basically, they were saying that an infinite amount of worthless paper would be printed to reimburse people for their losses. It was meant to comfort depositors but I had to fight the urge to pull out all my money and use it to buy gold.

[santafe2]

Re: Bank recommendation?

Personally I prefer credit unions and community banks. Bankrate.com has a Safe and Sound rating tool you can use to check the soundness of the bank(s) you're in now, and the soundness of any community banks and credit unions you have available.

Thanks shiny!. I just found out that our local bank has the worst rating of all the banks in New Mexico....

Looks like we're moving our accounts.

That said, I agree with your assessment. Your money should only be put in a local institution and never in Chase, Citi, Wells, etc.

[Milton Kuo]

Re: Bank recommendation?

One of the most chilling things I've seen was a notice at my bank after the crash of 2008, saying that the FDIC would insure all depostis of any size. Basically, they were saying that an infinite amount of worthless paper would be printed to reimburse people for their losses. It was meant to comfort depositors but I had to fight the urge to pull out all my money and use it to buy gold.

The unlimited FDIC coverage is only for transactional accounts such as checking accounts. This was necessary because some small businesses need to have relatively large sums of money for payrolls. I think it was during the Indy Mac bank run that a business owner was waiting in line to withdraw his money because he had $600,000 in an account for his business payroll and he was in danger of losing $500,000.

If I remember correctly, the no-limit insurance of transactional accounts is no longer in effect. Accounts are once again only insured up to $250,000.

[LorenS]

Re: Bank recommendation?

You need to check Bankrate periodically. Our credit Union had a 4 star rating only months before it failed. Fortunately ours was purchased quickly and it caused minimal disruption.

Our credit union made tons of builder's loans (commercial loans - ha) in Florida during the boom years. Our CU was based in Colorado. They had no legitimate reason to invest in the Florida property bubble. They had no branches or any other business presence in Florida.

[ProdigyofZen]

Re: Bank recommendation?

You need to check Bankrate periodically. Our credit Union had a 4 star rating only months before it failed. Fortunately ours was purchased quickly and it caused minimal disruption.

Our credit union made tons of builder's loans (commercial loans - ha) in Florida during the boom years. Our CU was based in Colorado. They had no legitimate reason to invest in the Florida property bubble. They had no branches or any other business presence in Florida.

Credit Unions are non profits and they do not have a clue what they are doing.

Their was a recent rule change within Credit Unions that is about to alter who decides on loan creation from a central regulatory body to individual Credit Unions.

You can guess what is going to happen next...

[ProdigyofZen]

Re: Bank recommendation?

I'm concerned about keeping my money in the top 6 banks that have very high derivative exposure.

If you are concerned about a top 6 bank going under and the FDIC not covering the deposits you have a lot more to be worried about than a banking collapse.

Keep your money in the current back you have it in.

[ER59]

Re: Bank recommendation?

What about online banks like CapitalOne, Ally, Sallie Mae etc?

[shiny!]

Re: Bank recommendation?

What about online banks like CapitalOne, Ally, Sallie Mae etc?

Bankrate's Sallie Mae report - click on the bank name, memo and financial report. 5 stars.. looks very good.

Bankrate's Ally Bank report - 4 stars

No report on CapitalOne. Don't know why.

[ER59]

Re: Bank recommendation?

I meant in general, are they supposed to be safer than big banks. I don't think they actively participate in the mortgage insanity.

[jk]

Re: Bank recommendation?

I meant in general, are they supposed to be safer than big banks. I don't think they actively participate in the mortgage insanity.

it depends on how much you can rely on gov't bailouts for the big ones, whether the model will switch to "bail ins" [as has happened in europe] in which depositors lose money, whether your small bank has hidden but severe risks [remember that town in northern scandinavia- i forget which country - which had its pension funds in cdo's?], whether your deposits are above the fdic limits, and what you think would happen if the fdic, which is very thinly financed, went belly up. you can try to diversify by using multiple institutions, but the kind of crisis that would take down the big banks will sweep all before it. you can convert it to gold and bury it in the back yard, but then it's illiquid, not very handy for actual spending, and you'd better be sure no one sees you with a shovel.

[switters]

Re: Bank recommendation?

Currently my bank (Mechanics Bank) gets 4 stars, but as I mentioned, it was just purchased by an equity investor that plans to "roll it up" with other community bank purchases and sell to a major financial institution.

Protection from derivatives exposure is only one reason I like this local bank. They support the local community in ways that the bigger banks do not. Unfortunately both the local support and (possible?) greater protection from derivatives exposure is likely going to disappear now that it was bought by an equity investor.

I searched for all 5-star rated banks in CA. Strangely, Wells Fargo appears on the list despite being one of the top 6 banks in terms of derivatives exposure. How is that possible? It is apparently safer than my current bank which has very low exposure.

[jk]

Re: Bank recommendation?

your criteria and bankrate's criteria are obviously not the same. i don't know that you can trust bankrate's info if you're thinking about a financial meltdown. remember, all those garbage cdo's were rated AAA.