This is a follow-up to my previous blog.  As regular eaders well know (though new ones may not), my last post  discussed the various insurances/guarantees offered by the US Government (through the Federal deposit Insurance Corporation “FDIC”) on bank deposits.   Well, last week (on May 20^th), President Obama officially signed a bill that included a provision extending the $250,000.- maximum FDIC insurable value of deposits through December 31, 2013 ( this is instead of reverting back to $100,000.- of coverage at the end of 2009, as originally planned).  Remember, this is for bank deposits earning more than 50 basis points per annum (0.50%pa). Below this interest rate threshold, all deposits are fully insured. regardless of value. This insurance is not available from all banks, so make sure you use a banking institution offering FDIC insurance on itsdeposits. Most banks in the US are members of the FDIC, however, so you probably don't have to worry.

This is good news for depositors in these troubled times: when many banks have had to write-off a large number of loans, and quite a few are still scrambling to stay solvent, it's always important to know that your money will be safe no matter what.

-Tony

(Stay Tuned!)

Last Thursday the Obama administration released the results of the stress tests, which assessed the condition of the most important US banks.  And this you probably know, since the news followed it closely.  In its wake, however, I thought that this might be a good time to state a few facts and guidelines regarding the safety of bank deposits.

The tools available for judging the soundness of a bank are limited, especially to depositors, since one would need a great deal of financial analysis knowledge, which most people don’t have. As a result, it is best, in today’s environment, to play it simple.  For those who have not received any finance-related degree or training, you need to know only this: simple is spelt F-D-I-C.  Yes, all you need to be concerned with is whether or not you have your deposits in A) a US Bank and that it is B) fully insured by the US Government through the Federal Deposit Insurance Corporation (“FDIC”).

Here a few guidelines for placing deposits in banks insured by the FDIC:

1. Any deposit (or account) with any one bank that pays interest above 0.50% per annum has FDIC deposit insurance coverage up to $250,000.- This coverage was increased last year from $100,000. This increase in coverage was set to expire on December 31, 2009. A bill was passed by the Senate last Wednesday extending the increased coverage through 2013. However, it is important to remember that the coverage is limited to $ 250,000.- Thus, any sum above this limit, whether interest or principal, or divided in several accounts of the same owner or entity, would not be covered by this insurance. Make sure that the principal on deposit plus the accrued interest will not exceed $250,000.-  If you  have sums in excess of this amount place them with several banks making sure that no one deposit (plus interest) exceeds $250,000.-

2. Any deposit (or account) with any one bank, paying interest of less than 0.50% per annum has unlimited FDIC deposit insurance coverage through December 31,2009. This expiration is likely to be extended in line with the recent bill passed, covering deposits paying higher interest rates.

3. If you are not certain if a bank is insured by the FDIC ask the teller or the bank officer you know. He should tell you clearly, it’s the law. If he hesitates in giving you a clear answer, deal with another bank. Don’t take any risk.

Hope this will help in allocating your deposits and minimizing your risk as we batten down the hatches for a little while longer. 

As always, stay tuned! (there will be more!)

Some people are more inclined to look on the brighter side of every situation. And my hat is always off to them. Optimism is a very healthly thing, and sometime intensely difficult to possess.  But when it comes to money matters, a clear picture is imperative.  Optimism is fine for distant prejections and personal relationships, but always remember to keep your head straight when it comes to your assets. 

Last week I wrote a post that some thought was a little too dark (until they started watching the news and reading the paper on the following days).  For my other readers who feel the same way (and didn't catch up on last week's print - it is a dying medium anyhow), here are a few quotes and comments from prominent investors and well known commentators on the economy.  You’ll find that their views further corroborate the ones expressed in my blog last week. The first is from one of the richest and most successful investors in recent memory. The man is no other than Warren Buffett, Chairman and Chief Executive Officer of Berkshire Hathaway, Inc. Here is what he said at the Annual Meeting of the company he runs, last weekend (May 2^nd & 3^rd): “I see no indication of recovery from the real estate slump that helped cause the current recession.” His # 2 in command, Charlie Munger had this to say: “losses in commercial real estate will cause huge agonies in the US as the recession continues.” Robert J. Shiller, Professor of Economics $ Finance at Yale, in the NY Times this last Sunday: “Like its predecessors, the current depression scare is characterized by serious problems that won’t easily go away. After the bursting of bubbles in the stock market and the housing market, balance sheets everywhere are out of whack, and millions of people are insolvent. So it’s hard to expect that there will be a sudden and impressive recovery.” Indeed, economic issues are not always evident in every-day life and thus we fall into a sense of complacency. In addition, we have this feeling that the government, in particular that the Obama Administration, is going to take care of all the economy’s problems, and soon. Good government policies will have a significant impact on the recovery, but overcoming the excesses of the last 10 years or so, requires a lot of adjustments in many sectors, and that will take time.  

So don’t prepare for an upturn, soon.  And don’t listen to those who predict one…

Stay Tuned

Dear Loyal Fans (and new ones, too)

It's time to start stretching beyond Miami's borders.  If you live in North Florida, or in any other state in the Union, let us know about your local banks so we can add them and their ATM locations to the system.

All we need to know:

- Bank Name & State
- Accepted Credit Cards at ATM
- Withdrawal fees for non-bank members
- Languages available on ATM (including Braille and headphone jacks)

(if you can, please also confirm that the machines take deposits and that the Branch located ATMs have 24 hr access). 

Is it a lot to ask?  just write these things down the next time you take out some money, and send us the details. Then we'll bring our service to you.  It's time we did a little more growing...

The person who contributes the most by the end of August will get a brand new BMW black leather and chrome key-chain as well as your choice of A) the entire first season of Scrubs on DVD B) the entire first season of How I Met Your Mother on DVD C) the entire first season of Family Guy on DVD or D) the entire first season of ROME on DVD

If you are a member of the FindATM.com facebook group (join now if you're not!) you can leave your responses in the Discussion Group called "Banks." Otherwise, please send your information by email to TheTeam@FindATM.com with the subject heading "Grow Time" along with a valid email address so we can contact you if you win.

This is open to any group members (so tell friends to sign up)!

*All entries must be accurate to be counted toward the winning total.

The Economist cover in the most recent issue is entitled:  “A glimmer of hope?”  (obviously in reference to the present world economic situation). But believing that the worst is over is a mistake. No doubt, the slump we are experiencing has been made worse by panic and despair. Also, there is no denying that most significant stock markets around the world have seen their indexes rise, recently, and several other economic indicators for many countries have improved.

Yet however welcome these events are, all they indicate is that the rate of decline is slowing, not that the recovery has begun. To quote The Economist: “A real recovery depends on government demand being supplanted by sustainable sources of private spending. And here the news is uniformly grim”.

Just look at the headlines of several of the most important local and world renowned dailies. South Florida Business Journal: “Biscayne Landing Loan in default”, “Bank United has run out of equity, deal could hinge on value of its branch network.” Wall Street Journal: “Chrysler Near Bankruptcy Filing”, “Microsoft Gets Stung by Global PC Slump”. NY Times: “Recession Far From Over, Already Setting Records”, “Regional Banks’ Health is Causing New Worries”. Add all this up and the case for optimism fades quickly.

Still to come, commercial property companies are facing a crisis. An estimated $600 billion of commercial mortgages are expected to mature in the US between 2009 and 2011. Many of the big borrowers will have difficulty in renewing, let alone in repaying these loans. Commercial property loans account for 1/5^th of all US bank loans! Yes this is real, and it will cause some major bankruptcies and large write downs, further straining an already moribund banking system. Stay tuned, the worst of the current recession may be over, but a recovery is not yet in sight…

A few weeks ago the US Treasury announced a new bank rescue plan, and all potential participants have been scrutinizing the proposal to find the best ways to benefit.  In basic terms the program consists of using “public-private partnership to take up to $1 trillion of troubled assets off banks' books and unfreeze credit markets” (Reuters, March 25^th).

Bankers are determining how to use the program to sell billions of troubled assets. Traders, fund managers, pension funds and investment bankers, how much to pay for these assets and whether to buy them.

The initial consensus of most potential participants is that the program is well conceived, and that it will work. Yet, it is off to a slow start. A lot of the small print is still being examined and many crucial details are still missing, such as the size of loans that would be available from the FDIC (Federal Deposit Insurance Corporation), and whether banks could walk away, if they did not like the price offered for an asset at auction.  One of the biggest sticking points seems to be the price to be paid for the toxic assets. The banks want to sell high, while investors want to bid low. How do you bridge theses opposite objectives? Some banks carry many, if not most, loans at their book value not at their market price. Selling these loans, at distressed prices would most certainly result in large accounting losses, to cite one example. The same is true for insurance companies, which have longer term horizons and hence, can hold on to impaired assets through adverse conditions. Some institutions might just be pressed to sell by their Federal regulators. We will have to wait and see how this will sort itself out.

On the investors’ side, many seem anxious to give it a try, as there is always money to be made from discounted assets. Private investors, such as Black Rock, and pension funds, such as CALPERS (California State Pension Retirement System), have expressed interest. Though many insurance companies are holders of such toxic assets, others ones (and even some of the better capitalized debt-holders) also represent a huge block of potential capital for buying assets under this plan. A lot will depend on whether investors perceive that we have reached, or are reaching, the bottom of the recession.  And that will depend a great deal on whether or not the banks have passed their peak losses and write-downs.  It promised to be an interesting couple of weeks after the proposal's annoucement, but present stock prices suggest little notice. We'll see...

Keep your fingers crossed and Stay Tuned!