The Federal Reserve makes my head hurt trying to make sense of it. Please advise when we should start stuffing cash in our mattresses withdrawn from our banks.
“Please advise when we should start stuffing cash in our mattresses withdrawn from our banks.”
Limiting the business you transact with banks is a good idea anytime.
Here is what you need to understand about being a depositor at a bank: you’re an unsecured creditor. That means that if the bank goes bankrupt, you’re last in line to get paid. That’s where the FDIC comes in with deposit insurance. The FDIC protects your deposits. The problem is that the total amount in the FDIC insurance fund is $25 Bil. The total amount of deposits in commercial banks is $9.3 tril (or $9300 Bil). So, the FDIC can cover less than 3/10 of one percent of bank deposits in the case of widespread bank defaults.
OK. So let’s say that we have a situation where there are widespread bank defaults. That came very close to happening in 2008. It’s assumed that FDIC would be backed by the Federal government if the insurance fund were to go bust. That’s assuming of course that dear leader, nancy pelosi, john boehner, and harry reid would all go along with that.
Is it worth the less than 1% interest you get on bank deposits to take that risk?