Dedicated to Deposits: Deals, Data, and Discussion

FDIC's Second Quarter Report - Number of Problem Banks Increase to 416

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The FDIC released its second quarter report on the banking industry. Here are some interesting numbers from the press release:
  • Deposit Insurance Fund (DIF) balance declined from $13.0 billion to $10.4 billion
  • Number of banks on problem list increased from 305 to 416
  • Total assets of problem banks increased from $220.0 billion to $299.8 billion
  • FDIC insured banks reported an aggregate net loss of $3.7 billion
The press release focused more on the DIF's reserves than its balance, "Combined, the total reserves of the DIF equaled $42.4 billion at the end of the quarter." There were several quotes by Chairman Bair in which she tried to ease concerns:
Chairman Bair went on to say, "The FDIC was created specifically for times such as these. No matter how challenging the environment, the FDIC has ample resources to continue protecting depositors as we have for the last 75 years. No insured depositor has ever lost a penny of insured deposits...and no one ever will."
...
Chairman Bair distinguished the DIF's reserves from the FDIC's cash resources, which included $22 billion of cash and U.S. Treasury securities held as of June 30, as well as the ability to borrow up to $500 billion from the Treasury. "A decline in the fund balance does not diminish our ability to protect insured depositors," Chairman Bair concluded.

More details of the report can be found in this NY Times article.

As a bank depositor who keeps under the FDIC limit, I'm not concerned about the safety of my deposits. As we saw last year during the peak of the financial crisis, the federal government will do what ever it takes to ensure financial stability. Not covering insured deposits would be a major blow to financial stability, and I don't believe the government will let that happen. Of course there are the issues of the growing national debt and the weakening dollar, but these are different issues than the safety of the deposits.

In addition to the quarterly report, the FDIC updated its database with the banks' financial data for the end of the second quarter. Ratings services like BauerFinancial and Bankrate.com use this data for their star ratings. Recent ratings had been based on 3/31/09 data. Their new ratings based on 6/30/09 data should be out soon. BauerFinancial has typically been the first to include the new data.

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Comments
33 comments.
Comment #1 by Anonymous posted on
Anonymous
Who is going to bail out the FDIC, they are broke as of this moment.
If we, as taxpayers are going to pay for it, I have a question: Do we have a say or we are just a punching bag and insignificant flea in this charade perpetrated by the Government.

1
Comment #2 by Anonymous posted on
Anonymous
I believe FDIC will need more money from the FEDs, which will print it and we as slaved lambs will pay for it on the long run by FEDs destroying the Dollar and its value as reserve currency.
FDIC, by closing these banks in future will have to replenish the revenue lost from the insurance fund.
The more Banks are closed the less insurance money is coming in and the whole down spiral feeds on itself.
I agree with the previous poster statements, but I have no answer since we are not a part of the solution but pawns on big egos in power.

1
Comment #3 by Anonymous posted on
Anonymous
Maybe you two should invest your cash in CDs overseas somewhere instead.

1
Comment #4 by Anonymous posted on
Anonymous
To Poster as Anonymous, at 1:15 PM, August 27, 2009. Did you invest in foreign country your CD or you are just talking trash?

1
Comment #5 by Anonymous posted on
Anonymous
Today the government's taxing power is very limited. They are able to tax only income, and that approach is resulting in a significant revenue shortfall at this point.

What they need to be able to tax is wealth. That will be done, in effect, by and through inflation. This approach will work for the government, but for us savers it's going to be a pretty difficult and rocky road.

1
Comment #6 by Anonymous posted on
Anonymous
Why would anyone believe the Wicked Witch of the West (a.k.a. Sheila Bair)?

1
Comment #7 by Anonymous posted on
Anonymous
.


>> Maybe you two should invest
>> your cash in CDs overseas
>> somewhere instead.

Indeed ... Not a bad idea at all ... Some of the foreign currencies are giving decent yields and capital gains.

Recently SunTrust had an attractive Structured CD based on Brazilian Real ... And it was insured by our beloved FDIC.

Australian Dollar, Mexican Peso, Russian Ruble are some of the currencies I like.


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1
Comment #8 by Anonymous posted on
Anonymous
.


>> Why would anyone believe the
>> Wicked Witch of the West
>> (a.k.a. Sheila Bair)?

Hmm ... Why indeed? ... One reason comes to mind is because she is the Chairperson of FDIC, a very important post.

I did not notice something that was not believe in the statements Chairperson Bair has made. Perhaps that is the second reason.


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1
Comment #9 by Anonymous posted on
Anonymous
.


>> Chairman Bair in which she tried
>> to ease concerns


Err ...

Perhaps word 'Chairperson' would do just fine!


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1
Comment #10 by Anonymous posted on
Anonymous
.


Wrote to "angray@fdic.gov" regarding the usage of word Chairman in FDIC's press release!!!


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1
Comment #11 by Anonymous posted on
Anonymous
.


I received an interesting reply from Andrew Gray.

===============================
From: Gray, Andrew "AnGray@fdic.gov"
Date: Thu, Aug 27, 2009 at 6:20 PM
Subject: Re: Usage of the word Chairman for Ms Bair
To: ************

She chooses to go by this. It was partly a "green" decision as existing stationary and other materials had "office of the Chairman."
===============================


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Comment #12 by Michael Swann (anonymous) posted on
Michael Swann
In my opinion FDIC should arrange more money from other resources. As the government is more concerned about FDIC, FED is the best source to draw money for FDIC.
--------------------------------
Michael Swann
Best credit card deals

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Comment #13 by Sam Cass (anonymous) posted on
Sam Cass
Before the FDIC goes to the Federal government for more cash, it's going to raise its assessments from the banks. That's the easiest and most politically expedient thing to do. The DIF itself has always been industry funded.

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Comment #14 by Anonymous posted on
Anonymous
To Poster Sam Cass, at 6:15 AM, August 28, 2009.

With less and less banks to pay into DIF and the banks avoiding idle cash and the increase in the percentage of liability to asset ratio, crated an environment for low interest rates that we as consumers pay the price in receiving miniscure interest rates on our money.
With other words, we are paying for DIF subtracted from our interest paying accounts. Instead of receiving 3%, we get 2% and the difference is paid into DIF, it is simple as that.

1
Comment #15 by Anonygal (anonymous) posted on
Anonygal
To Anonymous 8/27, how can Sun Trust insure that Brazilian CD unless the bank is on US soil? I just spoke to an FDIC rep and he said the bank the money is in "must" be on US soil to be insured. Is Sun Trust in the US and taking responsibility for insuring these Brazilian CDs? Thanks!

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Comment #16 by Anonymous posted on
Anonymous
.


>> With less and less banks to pay
>> into DIF and the banks avoiding
>> idle cash and the increase in
>> the percentage of liability to
>> asset ratio, crated an
>> environment for low interest
>> rates that we as consumers pay
>> the price in receiving
>> miniscure interest rates on our
>> money.

Well ... You consumers pay the insurance premium of Federal Deposit Insurance Corporation because you want/need this insurance, or at least you think you do.

In fact, I believe that this insurance is a fantastic bargain at the current premium and assurance level. It may sound a bit hard, but I do find US government to be faithful and creditworthy, so having the full faith and credit of the US government on our side is a nice thing to have.



>> With other words, we are paying
>> for DIF subtracted from our
>> interest paying accounts.
>> Instead of receiving 3%, we get
>> 2% and the difference is paid
>> into DIF, it is simple as that.

Indeed ... I agree with your simple explanation.

For vehicle insurance consumers can shop around very easily. With the deposit insurance shopping around is not too easy ... but it is not all that difficult either.

What the consumer is buying by paying up the insurance premium is the hope that in case of failure the FDIC (and US Government) will pay back their deposits. ... Well ... deposits made in foreign currencies also carry similar type of insurance arrangements. ( The risks involved are of course different ... but it is not as if the consumer is left without any choices for shopping for the deposit insurance. )


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1
Comment #17 by Anonymous posted on
Anonymous
.

>> To Anonymous 8/27, how can Sun
>> Trust insure that Brazilian CD
>> unless the bank is on US soil?

Err ... SunTrust is very much on US soil. It is Atlanta based bank. ( https://www.suntrust.com )


>> I just spoke to an FDIC rep and
>> he said the bank the money is
>> in "must" be on US soil to be
>> insured.

Sure ... I guess the FDIC rep was quite right.


>> Is Sun Trust in the US and
>> taking responsibility for
>> insuring these Brazilian CDs?

Sure ... SunTrust Bank is in US. However, I suspect you did not quite understand my message. I did not write that it was a Brazilian CD.

What I wrote was, and I quote "Recently SunTrust had an attractive Structured CD based on Brazilian Real ... And it was insured by our beloved FDIC."

Therefore if you wish to confirm, you might want to give your contact at FDIC (or elsewhere) additional details. The CUSIP# of the CD I'm referring to is 86789VJM0. This Structured CD called is SILC (SunTrust Index-Linked CD) is issued by SunTrust Bank, arranged by SunTrust Robinson Humphrey, Inc.


>> Thanks!

You're welcome.

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1
Comment #18 by Anonymous posted on
Anonymous
The Structured CD called SILC, is nothing less than gambling. Only the principal is insured, which means,
at maturity (15 Years) from now, if the real index is not performing as expected, you will only get the principal back and be prepared to kiss goodbye any interest for 15 years plus any inflation added to it.

You have to be an irresponsible and uneducated individual to agree to such terms.
There is no benefit in the account being FDIC insured, since your possibilities to do better elsewhere else are much greater than this structured deal.

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Comment #19 by Anonymous posted on
Anonymous
I agree with the poster from 5:21 PM, August 28, 2009.
Let say the average interest in a regular local CD will be 5% for the next 15 years, which means I can easily double my money in that time period but investing in the structured CD there is 50% chance to receive nothing but the principal, which in 15 years will be worth (depending on the inflation) less then half as of today.
in reality you may lose 100% of the money invested in that CD by not receiving interest for 15 years and losing principal to the inflation.
So what good is FDIC to you then.

1
Comment #20 by Anonymous posted on
Anonymous
According to their website, SunTrust Robinson Humphrey serves the needs of corporate, not individual, clients. To hedge against a declining dollar, I believe the only fixed icome investment protected by the FDIC would be Everbank's World Currency CD's. The Brazilian real CD is only offered in one flavor -a 3 month term with an APY of 5.09%. It requires a $20,000 minimum opening deposit.

1
Comment #21 by Anonymous posted on
Anonymous
You guys are smart.
Only one who will benefit of an index is the issuer of such structured index CD, in this case SunTrust Bank.
The index can be manipulated to show on the day of the maturity no gain of any kind and SunTrust had the use of your money for free for 15 years, wow!!!
FDIC is irrelevant on a none performing investment. FDIC logo is used to lure galable and conservative people only.

1
Comment #22 by Anonymous posted on
Anonymous
JPMorgan Chase Bank
Index Linked CDs
9/17/2024 15yr-nc1yr
Range Accrual CD
6.00% fixed coupon
USD 6mo Libor
Insured 100%
If the index falls on the day of maturity, you may not get your interest for 15 years, only the principal.
Any takers?

1
Comment #23 by Anonymous posted on
Anonymous
.


>>The Structured CD called SILC,
>> is nothing less than gambling.

Let us know a few casinos where they offer FDIC insurance to the principal being gambled. :-)


>> Only the principal is insured,
>> which means, at maturity (15
>> Years) from now, if the real
>> index is not performing as
>> expected, you will only get the
>> principal back and be prepared
>> to kiss goodbye any interest
>> for 15 years plus any inflation
>> added to it.

Err ... what 15 years?

Structured CD with CUSIP# #86789VJM0 matures on August 22, 2014. That's a 5 year term CD, not a 15 year term. ( You do not have facts rights. )


>> You have to be an irresponsible
>> and uneducated individual to
>> agree to such terms.

Really? ... Well as before you do not have facts. You have no clue about my education or my responsibilities. ... Rather than involving myself in speculating about your education (or lack thereof) I'd write this: It is my money, so how I choose to invest it is strictly my business.


>> There is no benefit in the
>> account being FDIC insured,
>> since your possibilities to do
>> better elsewhere else are much
>> greater than this structured
>> deal.

I see ... No benefit in principal being FDIC insured ... Hmm.

The key terms from the prospectus of CD with CUSIP #86789VJM0 are given below.

1. If the final exchange rate of the Brazilian Real (BRL) per US Dollar (USD) is higher than the initial exchange rate (reflecting a weakening of BRL against USD or strengthening USD), the interest payment will equal at least 13.00% multiplied by the outstanding principal amount.

2. If the final exchange rate of the Brazilian Real (BRL) per US Dollar (USD) is equal to or lower than the initial exchange rate (reflecting a strengthening of BRL against USD or weakening USD), the payment at maturity will equal 50.00% multiplied by the outstanding principal amount.


I don't know about you, but for me a reward of 13% or 50% at no risk to principal is good enough a deal.


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1
Comment #24 by Anonymous posted on
Anonymous
To the smart guy from Santa Clara, California, did you invest in the SunTrust index CD?

1
Comment #25 by Anonymous posted on
Anonymous
.


>> Let say the average interest in
>> a regular local CD will be 5%
>> for the next 15 years, which
>> means I can easily double my
>> money in that time period

Say all you want ... but the fact is there are no 5% CDs available in local banks! Guessing what will happen to interest rate and when over next 15 years is mere speculation. You are claiming that in effect you can easily speculate. ( Well ... good for you. )


>> but investing in the structured
>> CD there is 50% chance to
>> receive nothing but the
>> principal,

Aha ... but the return of principal is of supreme importance to me ... return on principal is secondary.


>> which in 15 years will be worth
>> (depending on the inflation)
>> less then half as of today.

Inflation? Where is it today? ( And how/where it would be over 15 years is ... well ... again mere speculation. )



>> in reality you may lose 100% of
>> the money invested in that CD
>> by not receiving interest for
>> 15 years and losing principal
>> to the inflation.

Right ... the usage of word may sounds quite accurate! By the same token you may get 50% return over next 5 years, and the inflation over next 5 may be tame to nil! ( I don't know from where you are getting the idea that the Structured CD in question matures in 15 years. )

BTW ... The COLA of Social Security is going to be zero for 2010. This zero increase in COLA has not happened for past 20+ years! And COLA is tied to inflation, so your speculation about inflation eating into the principal is not supported by something as fundamental as social security. At least not for 2010. ( And the CD in question matures in Aug 2014. )


.

1
Comment #26 by Anonymous posted on
Anonymous
To answer your question with question is not a polite way to communicate with people.
But, I have burning desire to tell
you that what you see and hear is all make believe propaganda from the FEDs.
They outright lie about all the numbers that are thrown at us. The facts are totally different than your logic in your posting. Therefore, you can not assume hypothetical numbers and mix them with real numbers, just to win an argument.

1
Comment #27 by Anonymous posted on
Anonymous
You still did not answer my question:

Did you invest in the SunTrust index CD?

1
Comment #28 by Anonymous posted on
Anonymous
.


>> According to their website,
>> SunTrust Robinson Humphrey
>> serves the needs of corporate,
>> not individual, clients.

That sounds correct.

The arrangement, so far as I know works like this: a) SunTrust Bank issues CDs. b) SunTrust Robinson Humphrey in turn offers these CDs to various corporations such as brokers, dealers, financial advisors. c) These corporations (e.g. brokers) in turn sell these CDs to individual investors.


>> To hedge against a
>> declining dollar

No ... Not necessarily.

SunTrust Bank offers several types of Structured CD tied-to/based-on various indexes/stock-baskets/currencies/etc. and of various durations.


>> I believe the only fixed icome
>> investment protected by the
>> FDIC would be Everbank's World
>> Currency CD's.

HSBC, Harris, Well Fargo, Citi, Marshall & Ilsley, Bank of America, JP Morgan Chase, Farmers & Merchants and of course SunTrust offer FDIC insured Structured CDs.


>> The Brazilian real CD is only
>> offered in one flavor -a 3
>> month term with an APY of
>> 5.09%. It requires a $20,000
>> minimum opening deposit.

Perhaps you are referring to some other CD. The CD I'm referring to has CUSIP# 86789VJM0, it matures on August 22, 2014.


.

1
Comment #29 by Anonymous posted on
Anonymous
.


>> But, I have burning desire to
>> tell you that what you see and
>> hear is all make believe
>> propaganda from the FEDs.

Burning Desire? ... Sure!

Propaganda from the FEDs? ... Well ... I can cite two points that have nothing to do with FED and its supposed Propaganda: a) The fact that social security administration has given zero Cost-Of-Living-Adjustment for 2010. Social Security Administration is not under control of FEDs. b) The prospectus of Structured CD that essentially states the interest oover 5 years to be 13% or 50% is published by SunTrust. And of course SunTrust is not under control of FED either.

In short what I see and hear are facts, (not propaganda) published by entities that are not part of FED.


>> They outright lie about all the
>> numbers that are thrown at us.

Really? ... In essence are you telling us that Dr Bernanke who was nominated to be the chairman of FED, by Ex-President Bush - a republican, and subsequently by President Obama - a democrat, both elected representatives of the US Citizens, is allowing the agency he heads to lie? ... Hmm.

Well if indeed that is true, then what are you going to do about it, besides writing on this Blog?


>> The facts are totally different
>> than your logic in your
>> posting. Therefore, you can not
>> assume hypothetical numbers and
>> mix them with real numbers,
>> just to win an argument.

What facts? Point out the differences between what you perceive as hypothetical numbers and what you perceive as real numbers. ... Also ... What argument? ... I am not into winning arguments. I am into winning rewards at no risk to principal.


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1
Comment #30 by Anonygal (anonymous) posted on
Anonygal
One can lose principal per my call to that bank. It does not have an early withdrawal penalty and the only way to get your money back before maturity date is for them to try to sell it on secondary market and I was told you may have to take less than original amount invested. It also does not allow interest checks before maturity so this is not for people who need interest to live on or just to reinvest.

The 13% is for a total of the 5 years and amounts to about 2.60% per year. The poster was correct. It was a 5 not 15 yr CD. The only way to make 50% total for 5 yrs is if the dollar is down against the Real on Maturity date. This makes it a form of gambling to me and not my cup of tea. But---to each his own.

1
Comment #31 by Anonymous posted on
Anonymous
.


>> One can lose principal per my
>> call to that bank. It does not
>> have an early withdrawal
>> penalty and the only way to get
>> your money back before maturity
>> date is for them to try to sell
>> it on secondary market and I
>> was told you may have to take
>> less than original amount
>> invested.

Getting the prospectus, (it is 34 pages long), and going thru it carefully and fully is the only definite way to understand clearly what this Structured CD is all about.


>> It also does not allow interest
>> checks before maturity so this
>> is not for people who need
>> interest to live on or just to
>> reinvest.

Of course ... this point is there in the prospectus.


>> The 13% is for a total of the 5
>> years and amounts to about
>> 2.60% per year.

Correct ... So it is either approximately 2.60% per year or approximately 10.00% per year. If I am getting a shot at making 10% per year at no risk to my principal, then I find it quite attractive. If 10.00% does not materialize, then 2.60% per year is not too shabby either!


>> The poster was correct. It was
>> a 5 not 15 yr CD.

Of course I am. I have the prospectus of this CD with me.


>> The only way to make 50% total
>> for 5 yrs is if the dollar is
>> down against the Real on
>> Maturity date.


True. What I call this type of a CD is a Variable Interest CD. In conventional CDs both the term and rate are fixed. In this sort of CD only the term is fixed, and the rate is variable.



>> This makes it a form of
>> gambling to me and not my cup
>> of tea. But---to each his own.

To me when I am not putting the principal at risk, it is nowhere close to gambling. When FDIC is insuring the return of my principal after 5 years, I call that as a not risky investment.


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Comment #32 by Anonymous posted on
Anonymous
To the Guy who is posting about the REAL CD, why are you commenting and criticizing and posting all the while you have not read, analyzed and understood the 34 page fine print?

1
Comment #33 by Anonymous posted on
Anonymous
Stop with the guessing and misunderstanding of structured CDs; call your financial advisor to explain it to you!

And the reason they give you a 34 page Disclosure Document, is so that you read it, not guess as to what's in it....

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Comment #34 by Johnny (anonymous) posted on
Johnny
It seems like every time I go into a Suntrust bank branch or call Suntrust their so-called customer service people try to get me to talk to one of their so-called financial adadvisors ie., salesman.  They then try to sell me those Silc CD's.  I have a brother who is a retired bank president.  I e-mail him a copy of their so-called 34 page disclosure document.  He said he did not understand a dam thing it was talking about.  He advised me to stay away from those Suntrust Silc CD's.  Case closed.

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