So far in the first month of 2010 15 banks have failed to make due and keep their doors open. Six falling friday nigth the biggest holding a total of $1.87 billion. Customers are protected up to $250,000 however, by the Federal Deposit Insurance Corporation. We keep hearing that we are making the turn-around but are we? We still see businesses to close and jobs being lost. Banks are supposed to be the place where you save your money, but these days it seems like its where you put your money to lose it. A penny saved is a penny lost? I don't know what I am going to put my hard earned money into because it doesnt seem like there is a stable place to put it anymore.
http://money.cnn.com/2010/01/29/news/economy/bank_failures/index.htm
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Well, as you said, bank clients are ensured a great deal of their money by the government. The money is quite secure, barring a cataclysmic cessation of lending to the U.S. Banks remain the best place to store your money, and the interest you will receive is way better than keeping it in the mattress.
ReplyDeleteTo the contrary, Sean. The interest rate for my bank account is incredibly small. However, the opportunity cost of keeping it in my mattress and facing the risk of it being stolen is is larger than the probability of my bank closing. So I will be sticking with my bank.
ReplyDeleteHowever, I am unsure what happens when a bank closes, or why. Is it just that there are larger banks out there with a higher demand, so the community banks are shut down?
Actually, to add to my post and perhaps respond to Christine's, here is another thought. The small banks that have failed this month are the result of the causes of the financial crisis, still reverberating around the economy. The bank bailout primarily targeted the big banks, attempting to infuse them with money to keep them solvent and encourage lending. Except, beyond keeping them going, the bailout contained no stipulations responding to the causes of the crisis, no requirement for new lending. We have thrown life vests to the biggest, most influential of the banks, and left the rest to tread water in yet turbulent seas.
ReplyDeleteI'll cover the drive behind the financial crisis with one of the articles I post in this upcoming week.
Thankfully people didn't lose the money they had deposited in their banks. I do agree that smaller banks such as the ones that have closed within the last month are feeling the repercussions of the financial crisis of this country. Like Sean said the larger banks were saved by the bailout while the smaller banks were left to fend for themselves. Those people who now have to switch banks probably are burdened with the decision of where to go now, but I'm sure that the banks have it set up so that it is easy and convenient for people to transfer their money to another bank.
ReplyDeleteThanks Sean. I really want to understand this.
ReplyDeleteAlthough I really don't trust banks either, I still know that it is much smarter to keep my money there. So much can happen when money is not in a secure place such as a bank, and I would rather sacrifice a few hundred dollars than lose my entire life-savings through a robbery or something of that manner. It really comes down to a calculated risk, in the fact that either way you are not secure but you take the best chance you have of saving your money.
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