FDIC May Not Have Enough To Bail Out Banks §
IndyMac Bank failed and the government has taken over.
Your money up to $100,000 is insured. If you have a joint account, it's up to $200,000. IndyMac account holders with higher balances will only get a partial amount of the money above the FDIC-insured level.
However, news sources are reporting that IndyMac Bank's failure will use up somewhere between 7.5% to 15% of the FDIC's entire $53 billion insurance fund (paid into by banks). A few more large bank failures (or a lot of smaller ones), and the FDIC (Federal Deposit Insurance Corporation) will be wiped out or will have to turn to us taxpayers yet again.
Like the Federal Savings and Loan Insurance Corporation (FSLIC) was wiped out back in the 1980s due to the savings and loan crisis, contributing to federal budget deficits throughout the 1990s.
Right now, according to analyst Richard X. Bove, a number of small banks are in the danger zone. (Other industry watch dogs are concerned about many more banks.) One local bank in major danger is Downey Financial: almost 14 percent of their outstanding loans are bad loans, late loans, or foreclosed assets.
One major bank that you should be concerned about is Washington Mutual. According to Bove, it is not in the danger zone, but on the very edge of it. Personally, I think Washington Mutual already is in danger.
Might not be a bad idea to do some research to see if your bank is okay. However, don't just rely on ratings. The information may be dated.
Update: 05:04pm PST, Tue 07/15/2008
Here's Richard X. Bove's list in PDF. There are two charts listing banks. On the first, watch for banks with percentages in the last column above 5 percent. On the second, watch for numbers above 40 percent.
http://dealbreaker.com/images/thumbs/Bovecommentarywhoisnext.pdf