What happens if a bank goes bust?

formulaonefan

So all we are saying is if a bank goes bust then forget about your saving as it might take forever or never to get your money back? I thought up to £35K is safe is too good to be true.

formulaonefan

eva6206213 wrote: »

thank you for your sharing~

Admin, this response seems to be some kind of automated response/Spam! Between 7.30am - 8.30am there has been 45 posts with same or similar msg. Suspend/block/delete the post please!

LongTermLurker

LardyCake wrote: »

The "^^^"s are the clue, they point to the post above. Translated it means I agree with everything the poster above said. In my case it was isofa's post number 11 in this thread.

[edit] or were you being humorous?

Thanks - wasn't being funny this time - I really didn't understand what you meant - I'd have just said "ditto". (tbh I thought you were saying that isofa was repeating "what he said"/someone had already said it before and I wondered who he was - don't worry, I follow you now)

edwinac_2

Paul Watson of PrisonPlanet notes the shrill warnings from Yahoo...

Run On The Bank? Americans Could Lose Their Deposits
Prison Planet
September 16, 2008

You know it’s bad when Yahoo.com features a story about fiscal armageddon



Paul Joseph Watson
Prison Planet
Tuesday, September 16, 2008

You know things are bad when Yahoo.com, the most trafficked website in the world and usually a purveyor of mindless celebrity gossip, cooking tips and dating advice, features a top story about how Americans could lose their bank deposits following the collapse of Lehman Brothers.

For the Internet giant to prominently report that there is already a “slow motion run on banks” is indeed a landmark event, and precludes even the most ignorant American from claiming they were not forewarned about the unfolding economic catastrophe.

The article points out that although the Federal Deposit Insurance Corp. guarantees individual accounts up to $100,000, the FDIC fund only has about $50 billion to “insure” about $1 trillion in assets across the nation’s financial institutions.

When Americans realize the fact that banks are “going to run out of money”, the article nonchalantly states, a run on the banks will accelerate.

The warning comes from top economist Nouriel Roubini, of NYU’s Stern School and RGE Monitor, who correctly predicted the severity of the credit crunch. Roubini says there is already a “slow-motion run on retail banks” occurring nationwide.

He advises that people with accounts over $100,000 in value should at least spread them out among different firms.

The use of such inflammatory language like a “run on the bank,” especially from the most visited website on the entire planet, is phenomenal and other news websites as well as financial advisors have been cautious to use such terms in an effort to prevent panic.

For example, we read in today’s Seattle Post Intelligencer that, “Sara Hasan, an analyst with Seattle’s McAdams Wright Ragen Inc., said she didn’t even want to use the word “run” — as in “run on a bank” — during an interview, because “these are very touchy times.”

Other advisors are more up front with their warnings.

“First off, go ahead and make a run on your banks. If you have money with a brokerage firm or bank that is in trouble, get your money the heck out of there!” writes Joe Ponzio.

“In reality, I don’t want to cause a run on the banks; but, I won’t prevent one by saying that everything is fine and that you should wait until it is too late. My recommendation: Move your important savings and checking accounts to banks that have a higher likelihood of weathering the storm,” he adds.

Redruth_2

Hi,
I know you are covered for £35K but what happens if your accounts are in joint names? Is it £35K per individual (e.g. a total of £70K for a joint account) or does the account just qualify for a total of £35K?

Baldur

Redruth wrote: »

I know you are covered for £35K but what happens if your accounts are in joint names? Is it £35K per individual (e.g. a total of £70K for a joint account) or does the account just qualify for a total of £35K?

See FSCS FAQs.

edwinac_2

This from the site of Professor Michel Chossudovsy, Professor of Economics at the University of Ottawa and Director of the Centre for Research on Globalization (CRG), which hosts the critically acclaimed website www.globalresearch.ca

FDIC Running out of Cash: No Bank is Safe in this Alarming Atmosphere



Global Research, September 19, 2008


Be very, very careful. There are reports the US Federal Deposits Insurance Commission is running out of money. Chairman Sheila Blair has been forced to issue a statement. "US banks are overwhelmingly safe and sound and the Government fund used to cover insured deposits will be adequate to absorb any losses, even high losses," she says. But Brian Bethune, US economist at consulting company Global Insight, said: "Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund."

Christopher Whalen, senior vice-president and managing director of Institutional Risk Analytics, said: "We've got a … retail bank run forming in this country."

On Monday, US Treasury Secretary Henry Paulson said the nation's commercial banking system "is safe and sound", and that "the American people can be very, very confident about their accounts in our banking system".

FDIC officials say 98% of US banks still meet regulators' standards for adequate capital.

Associated Press reported that the FDIC was down to $US45.2 billion ($A57 billion) - the lowest level since 2003.

Whalen then wrote that reports the FDIC was running out of cash had no basis.

His statement said: "It is essential that people realise the US Treasury will advance whatever cash is needed by FDIC to address bank failures and make good the deposit insurance guarantee. There is no issue regarding the bank insurance fund, but unfortunately most of the public do not understand this. The FDIC needs to make this clear in all of its public statements."

IRA has been constantly in contact with the FDIC and other regulators and knows more about this situation, I would suggest, than the US Government.

The situation may not have been helped by a report from American Banker concerning the deal by Bank of America, the FDIC's biggest customer, with 10% of the nation's deposits, to take over Merrill Lynch saying "it is unclear how much that acquisition would increase B of A's risk profile".

It is an intricate game, with the stability of the nation's finances on the line. American Banker says regulators will meet the Senate Banking Committee, which is "increasingly worried about the FDIC's ability to pay for the growing number of bank failures, and relaxing the barriers between banks and the riskier affiliates is likely to raise some concerns".

It said the Federal Reserve board had waived long-standing limits designed to prevent commercial banks from bailing out affiliates, including their investment banking units. The waiver, which will last until January, was seen as helping B of A make the Merrill deal.

"That's specifically so that no one will question Bank of America's ability to capitalise Merrill Lynch because it allows B of A to use its deposit base, which is enormous, to capitalise the broker-dealer," said Chris Low, chief economist at First Horizon National Corp's FTN Financial Capital Markets.

"The initial worry for the FDIC is that deposits will be used to backstop investment banking operations, which in and of itself is risky."
This sort of statement has the potential to roil troubled markets. Statements to the effect that there is no cause for alarm, although accurate in the immediacy, can cause the public to consider the opposite.

But the genie is out of the bottle.

These developments draw attention to how close we are to widespread alarm, and in that environment no bank is safe.

Paul Craig Roberts was assistant secretary of the Treasury in the Reagan administration. He was associate editor of The Wall Street Journal editorial page and contributing editor of National Review. He is co-author of The Tyranny of Good Intentions.

He wrote on Tuesday: "Most Americans, including the presidential candidates and the media, are unaware that the US Government today, now at this minute, is unable to finance its day-to-day operations and must rely on foreigners to purchase its bonds.

"The Government pays the interest to foreigners by selling more bonds, and when the bonds come due, the Government redeems the bonds by selling new bonds. The day the foreigners do not buy is the day the American people and their government are brought to reality. This is not the financial position of a superpower … Will what happened to Lehman Brothers today be America's fate tomorrow?"

Hopefully, tomorrow is a long way off.

Meanwhile, RSG Monitor, a creation of Professor Nouriel Roubini and other top international economists and policymakers, reports: "The biggest US savings and loan, Washington Mutual, might be close to a bust. Dozens of other banks could be near bankruptcy and the beginning of a silent bank run is looming as depositors are nervous about their assets.

"Indeed, panic is mounting in financial markets: the CDS market is frozen because of the collapse of Lehman and fears of the collapse of AIG, WaMu and other financial institutions. At the same time, many hedge funds are now teetering as their losses are mounting. Investors in fixed income - including preferred stocks - have also experienced massive losses."

David Hirst is a journalist, documentary maker, financial consultant and investor. His column is syndicated by News Bites, a Melbourne-based sharemarket and business news publisher.

fatpig_2

formulaonefan wrote: »

What happens if a bank goes bust? lets say for example: Kaupthing edge. There are articles online about their credit worth and they have borrowed 400% etc. etc. What if they go bust?

I know that as FSA approved bank your money is protected up to £35,000/- but no one has ever posted any answers to the following questions:

1. How long will it take to get our money back if a bank goes bust?
2. Who do we contact to get our money back?
3. What evidence do we need to provide to get our money back? for example: kaupthing edge savings is online based company. If they go bust I'm sure their website will not be accessible, then how do we prove how much we had etc? Do you guys take printout of your balance? Do you guys have print-out of account number etc?

I just feel there are lots of unknown and it could become quiet stressful and have to go through lots of process to get our money back and could take as much as 6 months before we get our money back.

Sorry for all the doom and gloom. I just would like to be prepared for the worst and HOPE for the very best. Recently lots of companies are going bust and people are getting caught by surprise (i.e. XL and XOOM). I have a feeling many more to come.

How have you prepared for the worst?

You wouldn't have to wait to get your money back. Northern Rock savers didn't have to wait so you wouldn't have to wait either.


From yesterday's Financial times:

Alistair Darling, chancellor of the exchequer (finance minister), said last year after the run on Northern Rock that the government would guarantee every penny of savers’ money, not just at the Newcastle lender but at every other bank.

Lynt_3

Well, I've taken a deep breath and opened a Kaupthing Edge account and putting in a £17k lump sum that I will be receiving in 10 days.
I already have £30k in Principality BS, but in current climate want to spread money around.
I find this all so stressful and don't have anyone to discuss it with, apart from you guys.

I hope I'm doing the right thing.

edwinac_2

Private equity banker fears for the future..

Up To 500 Bank Closures Could Absorb FDIC Funds

Paul Joseph Watson
Prison Planet
Thursday, September 18, 2008

Patterson warns of 20-25 per cent chance of new Great Depression this year

Mark Patterson, chairman of private equity fund MattlinPatterson, told an audience of financial experts at New York’s Waldorf-Astoria this week that the U.S. could suffer up to 500 bank closures and that the chances of a new great depression are now as high as 25 per cent.

Financial conditions are “probably more challenging than at any time since 1929,” Patterson said, speaking at Dow Jones’ Private Equity Analyst Conference this week.

“We’re not in normal times. If you don’t accept that there is at least a 20 to 25 percent chance of a financial markets led depression you’re fooling yourself,” he cautioned, adding that “Saharan-like” credit markets are overwhelming companies.

Following the collapse of Lehman Brothers, Patterson warned that 300 to 500 U.S. banks are set to fail over the next three years and as a result absorb all of the FDIC’s pool of funds.

As we reported on Monday, the Federal Deposit Insurance Corp., which guarantees individual accounts up to $100,000, only has about $50 billion to “insure” about $1 trillion in assets across the nation’s financial institutions.

This has led top economists like Nouriel Roubini, of NYU’s Stern School and RGE Monitor, to openly warn that a “slow motion run on the banks” is already occurring nationwide as individuals move their deposits to safer havens.

Patterson put the figure at 300-500 bank failures presuming that other well known investment banks survive, something he said “was not such a good assumption.”

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